May 14, 2026 · Ohio Retirement Study Council · 13,291 words · 14 speakers · 102 segments
Good morning everyone and welcome to Retirement Study Council for the month of May. And I see everyone is really excited to be here. And we are going to go ahead and proceed at this point. We're calling this meeting to order. And so, Director, would you please call the roll? Mr. Chairman. I am here.
Representative Brennan. I'm here.
Representative Plummer. Here.
Vice Chairman Romanchuk is excused. Senator Blackshear excused. Senator Blessing.
Ms. Miller? I'm done.
Dr. Potagell? Here.
Mr. Shearer? Here.
Director Carragher? Here.
Director Foley? Here.
Director Rourke? Anthony Bradshaw, sitting in for Director Rourke.
Director Stenzred? Here.
Director Toole? Here.
Mr. Ikey for the AG? Here.
You have a quorum, sir? Thank you, Director. And so I will direct members of the council to the minutes of both February 12th Retirement Study Council meeting and the February 12th meeting of the PERS Actuarial Audit Subcommittee. Both of those are in your folders. Both of those are on your iPads. And so I ask you if you have any additions or corrections. Seeing none, the minutes of both of those meetings will stand as approved. And we are going to jump right into it with Mr. Vojko. And I see his excited presence amongst us again. And so it is time for investment performance review. And Mr. Vojko, we're happy to see you, sir.
I am happy to be here, Mr. Chair. Excuse me, I've got a few allergies that are nagging me. I'll do the best I can. I'm Jim Voitko. I'm the President Emeritus of RVK, Inc. We are the fourth largest investment consulting firm in the U.S. and increasingly getting clients overseas as well, which, much to my surprise, but there it is. I wanted to talk a little bit about good news because most, This is one of the easier meetings that we've had together. 2024 and certainly 2025, which we're going to talk about today, have been exceptional years. And maybe the best way to start the conversation is to just remind ourselves how good the investment climate was. So I'm on page six of the big book. I will be dancing back and forth, such as my heavy feet allow me to, between the summary memo, the executive summary, and the big book to try to make this as focused as possible. But on page six, you see a panel on the lower left-hand side. And this is the market performance for a variety of the major asset classes in 2025. I call your attention. I'm sorry. Page six. I'm sorry, page six. Thank you. Page six. It says Capital Markets Review up on the upper left-hand side. Thank you, sir. It's got a pretty multicolored graph on the right-hand side, but I'm focused on the left-hand side, the table, and the lower panel of that table. And I'm specifically focused on calendar year to date, which is 2025, full year. It was an exceptional year for institutional investors in fact investors of all types U equity performed well You can see that in the first two lines 17 and 12 Those are numbers that are well above your actuarial requirements, and we'll talk more about that later. But the real surprise was that international stocks absolutely trounced U.S. stocks for the first time in quite a few years, up over 30% for both developed international stocks as well as emerging markets. But the good news doesn't stop there in terms of the investment climate because bonds were up 7.3%, which is very much in line all by itself with your actuarial requirements. cash, and that's the ICE, not the other ICE. This is a different ICE. Bank of America three-month T-bill index was up over 4%. And even real estate, which of course has been in the doldrum since COVID, actually posted a very respectable positive number. And then we go on down, and in fact even hedge funds produced a number while short of the equity returns were above fixed income returns. So it was an exceptionally good year for investors, and in exceptionally good years, they don't happen all that often. The key thing for institutional investors is can you make the most of it, like when the sun is shining and when the investment markets are attractive? And I think it's fair to say that the Ohio Funds, by and large, with only one very minor exception, really did a great job in making the most of what has been a good year. So now I'm dancing back to having set the stage in terms of the last year's investment climate. I'm on page two of the executive summary. This is where the good news is really focused. The first point I want to make is that all of the six plans outperformed or equaled, most of them outperformed, they're custom total fund benchmarks. Now, these are benchmarks that are set by the boards themselves, But they are typically composed of institutional quality benchmarks. They have to be transparent. There are various types of requirements for quality benchmarks. So I don't want to diminish this. This is a very good performance. And it means that the execution of their investment strategy was quite good over the year. On page three, there's another piece of good news that's quite interesting, and that is the Ohio funds as a whole have lower exposure to U.S. equity than many of their peers, or than the median peer. And we'll talk a little bit more about that later because that is a trend that's happening across the industry. And, in fact, several of the funds that in Ohio have actually decreased their exposure to U.S. stocks as well. They also have higher real estate allocations. So recall what I just said, that U.S. stocks performed lower than international stocks last year. And real estate, while recovering, still had a low single-digit positive return. But the Ohio funds ranked very well against peers in our report with the single exception of the highway patrol system And they did that because they were effectively diversified across effective asset allocations, the most powerful driver of returns and risk, by the way, for an institutional fund. And the other thing is that, interestingly, three of the six plans had higher exposures to those international stocks that did so well last year, much higher than the peer median. So the net result was that the Ohio funds, again, with the exception of the Highway Patrol, and I don't want to make too much of that because it's a single year, and the longer-term track record for that particular pension systems investment program is quite good. If I could turn to page four of the – and, by the way, interrupt me with questions at any time. I don't mind that at all.
Let's pause right there for a second, Serge. Is there any questions from the Council so far? All right, please proceed.
Thank you, Mr. Chair. So I'm on page four of the executive summary, and one of the things that we track for you are changes in the policy targets that are set by the boards of these plans. These are indications of where they would like to take the plan or where they are taking the plan in terms of that most important asset allocation framework. And as you can see, both STIRS and the police and fire system reduce their exposure to equity overall, and particularly U.S. equity. This is something that we're seeing across the country. It's gradual. It's very much in line with our forecast capital market assumptions, simply because the U.S. equity market has done so well for quite some time, with some hiccups along the way, but with the exception of last year, has done vastly better than bonds and vastly better than international stocks. So we have a change in the asset allocation universe that is leaning against the wind, which we think is probably a very prudent thing to do. We know that from market history, equity markets, stock markets across the world and in our own country don't go up uniformly forever. In fact, there's a good deal of statistical evidence that shows that when they reach levels of valuation that are quite high, the next 10 years of returns tend to be very muted. So it's a point of caution that I would make. And with that, you know, if you care to, and you don't have to, but if you look at page 10 in the big book, you will see valuations. I'm sorry, it is page 9. You will see valuations. I'm sorry, it's page 8. on the far left-hand side in the big book, you'll see that in the lower left-hand panel, a blue diamond. And that is the smooth 10-year price-to-earnings ratio of valuation measure for U.S. large-cap stocks, like the S&P 500. And as you can see, it's way up there. It way up there versus its historical norms That doesn mean that the market is going to collapse I don know that No one knows that But it does mean that if you rely on historical data, that the expectation for the next 10 years of returns, on average, are likely to be lower than we've recently experienced. It's just like anything else. When you buy high, you have to temper your expectations about what it is that you should expect going forward. And I think that's why, going back to the memo, I told you I'd be dancing back and forth, Mr. Chair, on page four, that some of your systems have been paring back on their U.S. equity exposure. And again, that's something that is not unique to the Ohio systems at all. So if we're on page five of the memo, the executive summary, I wanted to also mention that we have a situation here where the good news doesn't stop because the performance of the funds has significantly exceeded your actuarial requirements. What does that mean? Well, what that means is that the investment programs of the Ohio funds have been contributing to pushing up the funded ratio and the financial health of the plans. And that's a very good thing. It is our experience, by the way, that when we see a plan in deep distress, a public pension plan across the country, and we operate in 39 different states, it almost always is a bad contribution policy that is very weak or sometimes in some years non-existent that gets a plan in deep financial trouble, meaning a high unfunded liability. And the good thing about the Ohio plans is that their investment programs have been a positive contributor to the financial health of the plans. Now, that said, I want to make a point of caution here because three of the plans have high assumed rates of return. Now, high is not necessarily good in this circumstance because when you have a high assumed rate of return, it basically means that you're putting a cap or some downward pressure on contributions. That may prove to be unwise. It did prove to be unwise in the late 1990s and early 2000s when the asset values shrank, but the assumed rates of return were very high. So these assumed rates of return that are 7% or higher in the case of the Ohio plans are well above, at this point, the national average, whether it's looking at the NASRA, that's the National Association for State Pension Plans, or whether it's our own public fund survey. and this is a point of caution because it means that contributions compared to the systems that have moved their assumed rates of return down into the 6% range going forward are somewhat suppressed. That may prove to be fine, but it is a point of caution. And were I serving on one of these boards, I would be asking the actuary, is this a taxable time where we should be carrying an above-average assumed rate of return, which means lower contributions than other systems that are in the 6.5%, 6.75%, 6.8% kind of range. So I did want to mention that because I think it is a – outliers often will tell you a story that either is something to applaud or something to be cautious about, but the outliers are rarely something that you should ignore in our judgment. So I want to turn to page 7 of the memo, and this page also occurs in the big book, so if you have trouble reading it, we can find it in the big book, these charts. These are my favorite charts, and the reason is that because too often we focus just on returns and we don't ask the question how much risk is being taken in the pursuit of those returns. And when the returns are good, we kind of put off to the side how much risk was taken, but risk is essentially like a liability. It can come back to haunt you. So what we really like are good returns with lower levels of risk. So let's take this top panel on page 7 and look at the Ohio plans. And I'm going to ignore the orange dot that's on the far right. That's the health plan. It kind of operates, as you know, on a separate set of liabilities and investment strategy. And let's focus on the other diamonds that you see here. If you are in the upper left-hand quadrant in this chart, So if you take your looking at the chart, if you raise your left hand and point it up, if you're in that quadrant, what it means is that over the last five years, you have had returns higher than the peer median, which is that horizontal red line going across, and you have done it with lower experienced volatility risk. That's a good thing. That is a very good thing. You have one plan, the PERS-DB plan, that has returns that are very close to the median, but they are exhibiting more volatility risk. And again, were I serving on the board, I'd say, gee, this is well within the bounds of reasonableness, but I'd still want to know what is the driver. How do we do an attribution analysis to find out why we sit here as opposed to in the upper left-hand quadrant? In the upper left-hand quadrant, you see SERS, you see STRS, you see OP&F, and the Highway Patrol kind of sits right in the middle in terms of risk, but has a higher five-year return than the peer median. And so this is one of the few situations where the peer data has some real meaning. We don't generally like to look at rankings all by themselves and put much weight on them. but when you put a large group of peers together and you have both risk and return, there's information to be had there about the health and the performance of the investment program. So I wanted to mention a little bit about Highway Patrol not because I want to pick on them Quite frankly as I mentioned before their long performance is quite good But they did not benefit as much from the good year as the other Ohio plans did, and I think that is probably best seen in the big book on page 14. As you can see on page 14, if you go down the one-year number, you can see that their returns were somewhat less than the other funds. Well above their actuarial requirement, by the way, and above their total fund benchmark. So these are good numbers, but it is an indication that the asset allocation that they had during the year did not extract as much from this great investment environment as the asset allocations that were in place and executed by the other plans. We did a little bit of thinking about that, and we can't say that we've done a full attribution, but one of the things was is they reported a significantly higher cash position. That's a very nice conservative position, but it also has returns even at current interest rates that are far lower than those that were experienced in the other asset classes that I talked about earlier. They also were the only ones that had a negative return in real estate, but only marginally. It wasn't significant. They also had, they're the only plan that has hedge funds in the Ohio group, and they have a fairly significant allocation. Hedge funds did well, certainly relative to the last 10 years, but they didn't do as well as U.S. equity, certainly not international equity. They did a little bit better than bonds. So the combination of these things just took the edge off their ability to pull out of what was a great investment year as much return as some of the other funds did. And you can see it also, they are the only ones that have a rank that is below median. You see it at 73rd percentile. Again, I'm not picking on them. In fact, if you were looking at this year in isolation of the circumstances of 2025, you would say this is a good year for the highway patrol. But I think it's worth mentioning, if only as a point of education, the power that asset allocation has, even over a short period of time, if it's a mismatch even moderately to what is happening in the investment climate for a particular period. Mr. Boyko, if you can just take a quick pause. I'm happy to. Yeah.
Give you a chance to catch your breath for a minute, and we'll turn to Dr. Papadjil.
Yeah, this is more of a clarification. I know we've asked this before, but it's probably worth repeating again. Could you explain the ranking system again to us?
Yes. This is a large peer group of funds. You saw all those gray dots that were in that. Those are all peer funds. and they have to be over a billion dollars at least to be included in the peer group. And we gather together basic information about their performance and so these are all public pension plans as well So we not comparing against corporate pension plans which live in a different world a different regulatory environment, different drivers, and so on, and we're not comparing them to endowments. So that's the—and you see the number of funds in this chart on page 14. Look at the—in each panel, you'll see something called population, And you'll see that it was 232 funds in the peer group that were available to us in executing this report. Is that responsive?
And so someone who scores, and I'll just pick on OBNF because they're number one, right?
If you're in the first percentile, that's terrific. You're at the top of the chart. You're at the top of the chart. It's not inverted the other way. If you're at the 99th, it's time to get to work. Or at least understand why you're there. And so we don't lean terribly heavy on this. It's instructive, but it's not nearly so important as the other two comparisons. Over the longer term, how's the investment program done, given the market environment, against the actuarial expectation, which is one of the key drivers of the contribution policy. Because if there's a mismatch there, one of the things has to be righted. Either the contribution policy has to be changed or the investment returns have to improve. And you have a lot more control over contributions, as painful as they are, than you do over what the market has to offer in terms of returns. So I hope that's a little more responsive.
Okay, great.
Mr. Chairman? Yeah, Mr. Voiko, we have another question from Representative Brennan.
Thank you. So the report notes that all six plans met or exceeded their benchmark over the seven- and ten-year periods. To what extent do you think this reflects strong manager selection versus simply good market conditions over the last decade or so?
There have been lots of studies dating back to 1982 on this topic. And in the 1982 study, which was a blockbuster study, it was shown that asset allocation, If you ignored manager returns entirely and just looked at asset allocation, it will typically account for anywhere from 80 to 100 percent of returns. And this is why we focus so much on asset allocation. Manager returns are helpful when they exceed their benchmark. But they are kind of, I would call them icing on the cake. They also can be used, though, to control volatility. Active management can be used to shape the risk-return profile of the portfolio. But if you want to look at the major driver of both overall risk in the portfolio and overall return, you must first start it with asset allocation. And by the way, there's something in between manager selection and asset allocation. called asset class structure. If you look, for example, in our book and you look, for example, at the fixed income pie charts for the various charts you find again not to pick on Highway Patrol but their asset allocation within fixed income looks quite different than the structure that is in the other plans. And so that, you know, again, that even accounts for more than manager selection. There are certain aspects of institutional investing where manager selection is extremely important. Private equity is one of them. Hedge funds is another, where the dispersion among managers is extremely wide. So bad manager selection can be materially negative if you don't get it right. But when you look at things like equity, you look particularly at fixed income, the dispersions are much tighter. So if you make a mistake, it's not good, but it's not going to kill the portfolio. We've done analysis that shows that something like a five percentage point change in either fixed income or public equity can overcome all of the positive or negative effects of manager selection. So we don't want to diminish the importance of spending time on good due diligence and good manager selection because it can be helpful. But if you do it to the neglect of your asset allocation, we think you're making a big mistake.
Quick follow-up.
That was a long response. I apologize.
No, I appreciate it. Follow-up. So to what extent, obviously artificial intelligence is being used more and more in the financial sector. So how is it currently being used, if at all, amongst our pension systems, and what's the future for that, and what safeguards should we be anticipating or thinking about as a general assembly?
That's a very big question for a very emerging topic. I don't know for sure the extent to which AI is being used inside your pension plans, and by that I mean inside the pension plan itself, the organization, but also within the managers and other vendors that they have used externally to support the program. But I will say this, and this is a good time to conclude my remarks about going forward, because we always look backward in this report, because that's where the numbers are. But there's always use, despite the uncertainty, in talking about what the future holds. So there is no question, and investors have voted with their feet, that they believe AI is a big, big deal. And for those of you who haven't used AI, I recommend that you try it on something, like planning a vacation trip or whatever, something. You will be amazed. You will be amazed. I was amazed, and I'm part of the old guard that likes to do things myself. I'm a regular user these days
So Mr. Boyko, your concluding remarks, sir
Yep, am I getting the hook? Not getting the hook yet Okay, well I can conclude in three minutes Okay So looking forward, geopolitical It's talk of the town, and for good reason. But if you look on the big book on page 7, what you'll find is that the majority of geopolitical events do not have a lasting effect on the capital markets. There have been some. World War II, World War I. I mean, but they have to be pretty big. And sometimes the effect can linger, the guns-and-butter inflation from Vietnam and the war on poverty, for example, that moved through a highly valued nifty-fifty stock market in the early 70s. But in general, what we've seen is that they can have very – geopolitical events can have very short-term negative effects, but few of them have long-term negative effects. Second thing is that these changes in asset allocation that I talked about earlier and the two funds that in this particular year made changes, those are worth paying attention to because of the importance of asset allocation. And we think that those are directionally, if we're right, they're directionally appropriate given our assumptions. The third thing to worry about, because investment consultants are paid to worry about for their clients, or at least good ones are, is the stubbornness of inflation. Even before the Iraqi geopolitical or the Iranian geopolitical event, the Fed was unable to get down to their target. In fact, even as much as they tried, they couldn't get there. And now, for two months in a row, we've seen retrogression. That's something to keep a real eye on, particularly in the context of very high stock valuations. AI, to the thrust of your question, and I'll conclude with remarks on that, looks a lot to me, at least at this point, like the Internet when it emerged. Internet turned out to be a big thing. But not a big thing for more than a couple of companies that actually engaged in it and successfully, Amazon, Microsoft. You don't need all ten fingers to say who were the big winners from operating the Internet. But the real benefit was spread throughout the entire economy. I wouldn't be surprised, let's say, that out of AI we get 10 companies that really are the guts of driving the AI infrastructure for the U.S. and maybe globally. But AI's biggest effect on the economy and the capital markets in the long run may be like the Internet, which we all now can't live without. and I suspect 10 years from now, we all can't live without AI. With that, I'll conclude, Mr. Chair. Thank you for entertaining me for so long.
I have one question before you leave us, Mr. Boyko. Any word of warning or caution? Should our funds be concerned in the future?
You've given us a very bright report today, but do you have any concerns or headwinds in the future Looking at the performance of the investment programs over the years you have professional investment programs The evidence is pretty clear. One of the new challenges that is being presented to public pension plans is because funding ratios have risen because of good investment returns, there's now a rising interest by constituency groups for higher benefits. Understandable, and that's not our purview, that's the state's purview, but we do know there is history on this, and this exact same thing happened in 1998 to 2001, where a number of public pension plans, because of the great returns of the late 90s, faced a lot of interest from constituencies and higher benefits, put those higher benefits in only to find that the asset basis could not move downward and could not support these new benefits in a financial way and had to work our way out of a hole. I say we, I'm talking about the public pension plan system. So we've seen pension benefit increases in New York. We've seen them in Chicago, even with very underfunded plans, by the way. And we've seen interest in them across the board, also in corporate America, whether it's Boeing or the auto companies where lower tiers that were put in place during the tough times are now being sort of moved up. So I think that's something to keep an eye on because the times are really good now, and we're now catching up to the sort of the benefit promises that are embedded in the contract between the various states and the pensioners. Adding benefits means a 50 to 100-year cost. I'm not arguing against it. That's not. I have no stake in this and no reason or right to say what's good or bad. I simply know the facts of the arithmetic. So I'll stop there.
Awesome. Thank you so much for your time and for your glowing report. Look forward to diving into it a little bit deeper on our own. Thank you very much. All right. We're going to move on to the next agenda item, which is the 2025 disability reports. and we'll start with Director Cara Herr from PERS.
Thank you. So good morning, Chairman Byrd and Council members. Thank you for the opportunity to highlight the successful trends in our disability program. As you know, benefits are important to members who cannot perform essential functions of their jobs, which is why we do everything we can to support our members through the rehabilitation to get them back to work. All the members' cases are examined closely by medical professionals who provide recommendations concerning viability of each claimed disability. Participants in the program have direct access to both clinical and vocational rehabilitation services through clinical case managers and vocational specialists. Last year, the number of our applications approved or granted decreased slightly from over the same period of 2024. And this has been a trend that's been going on since we made pretty major changes to them back in 2013, frankly. So the trends basically remain consistent with the number of applications received, the number denied, the number granted, and the number that were canceled. Of the 600 disability applications in 2025, 307 were granted, 74 were denied, and 206 were canceled. And again all those numbers are fairly consistent from the year As has been historically the case the disability rate for law enforcement is greater than the non division And again all those numbers are fairly consistent from the year As has been historically the case the disability rate for law enforcement is greater than the non division But again, those have been fairly consistent. And as has also been the case since 2019, muscular skeletal related conditions were overwhelmingly the highest of all the conditions, accounting for up to 35%. And that's followed by psychiatric, which again has been unchanged. So other than that, if there's any questions, the report is in your materials and happy to try to answer anything.
All right. Thank you so much. Seeing no questions, we appreciate that report. We'll turn to Director Foley with OPNF Disability Report.
Thank you, Mr. Chair. Good morning, members of the Council. Similarly, OPNF's disability program remains fairly stable. 2025 does see an overall decrease. We think that if you note the amount of claims in 2023 and 2024 in the five-year summary, that those were sort of a COVID holdover. So claims came in later, not as many board meetings, inability to go to doctors, et cetera. And we seem to be leveling back off. In regard to where we stand in public safety plans in the nation, there's no central database, but from the best of our understanding, they range from 30 to 50 percent of specifically public safety police and firefighters on disability. So the 31 percent would have a somewhat lower than average for public safety. and happy to answer questions, sir.
Director Foley, I see no questions. Thank you for your report. Turning now to Mr. Bradshaw on behalf of Highway Patrol.
Thank you, Chair Byrd and members of the Retirement Study Council. I'm Anthony Bradshaw, Chief Operations Officer of HPRS, sitting in for director work today. For 2025, HBR has received one application for disability retirement, and one was approved, which was submitted in 2024 for an in-the-line-of-duty injury. One application remained pending, which was eventually approved earlier this year. This experience is another decrease from the previous year when three were granted and five-year average is six. We currently have 163 disability retirees, up one from last year. However, it is worth noting that 69 of these, or 43%, are over the age of 60 and could not return to work due to mandatory retirement age of 60. A further breakdown of the 163 disability retirements shows that the 101 are in the line of duty and 62 are off duty. Our percentage of disability applicants granted relative to active members decreased from 0.21% in 2024 to 0.07% in 2025, with a five-year average of 0.35%. The percentage of disability retirees relative to actives continues to be at approximately 11.4%. And that concludes my comments on the disability experience summary, and I'm happy to answer any questions from the council.
Mr. Bradshaw, I see no questions. Thank you so much for your report. Next agenda item will be the 2025 internal audits,
and Director Karaher is first and please proceed with your internal audit report. Super thank you The internal audit report is in your package So Chairman Byrd and members of the Council again you have that material in your package We pleased to present the report in the most recently revised format It's by the Ohio Retirement Study Council. It's broken out into five reporting areas. One, the first reporting area is the current year, 2025, completed audit with recommendations. The second area is prior year, 2024 and earlier, completed audits with updates to the recommendations. The third one is 2025 completed audits with no recommendations. Those are my favorites. The fourth one is audit activities, and the fifth one is other audit-related activity. So the status presented is reflective of the internal audit activity executed during the 2025 calendar year, and that aligns with the corresponding six-month internal audit plans. Our internal audit group approves six months at a time for the board to approve their goals. Audit areas are identified via risk assessment procedures and are broadly categorized into five areas. No surprise, the first one is investments. IT is second, finance, benefits in health care, and then executive and other. OPERS internal audit presents a status of work performed at part of the OPERS May meeting and at their November audit committee meetings, and the audit recommendations are tracked by the internal audit division, and they're updated with both the OPERS leadership team on a quarterly basis as well as with the OPERS audit committee throughout the year until they're remediated. Just to highlight a couple of items in the reports, there's only two things I would just kind of point out. In the prior year, what the 2024 and earlier completed reports with updates to recommendations. On page 19, the report has only one open recommendation related to the prior year audit. This recommendation relates to the accounts payable audit and updates to the travel policy and expense approval limits. Just to note that that target implementation, it's low risk, but it is going to be completed in June of 2026. And the only one I would point out is in the active audit grouping, page 25 of the report. Five of the six active audits have been completed since the internal audit committee was finalized. The remaining audit that's open is the employer services audit. It's in the final testing phase and is anticipated to be completed this summer. The audit scope was expanded and broken out into phases due to the timing of other organizational projects and audit resources. So aside from that, it's a fairly boring report, so that's a good thing. I'm happy to take any questions.
I see no questions, Director Kara Hurd. Next is Director Toole, internal audit report for STRS.
Mr. Chair, if it's acceptable, I'd like to defer to our Chief Audit Executive, Mr. Robert Vance.
That's acceptable. Thank you very much. Please introduce yourself again, sir.
Good morning. My name is Robert Vance. I'm the Audit Chief at STRS Ohio.
Welcome.
Thank you. Thank you. As required by Section 3307044, the report summarizes the activities of the STRS Ohio Audit Committee and Internal Audit for December 2025. During the year, internal audit completed a series of reviews and follow-ups across key areas. The results of these audits included recommendations and management's responses, are detailed in the internal audit summary that was provided to the board throughout the year. The audit committee met in August and December of 2025 to review audit results, monitor progress, and provide direction and provide approval of key documents. External auditors and consultants reported no issues requiring action by the board during those meetings. Internal audit did not identify any material issues regarding the audit committees that needed to be action by the audit committee and the board's attention. Management has been responsive to the recommendations and follow-up procedures are in place to ensure timely resolution of any items identified. A note, the council's suggestions for changing how the systems track and report closed audits, the discussion we had last year, did result in the intended clarity as you discussed. It's made it easier for our audit committee meetings and our board to understand the information that's produced. So thank you very much for that.
And this concludes my remarks, and I'd be happy to answer any questions if you have them. All right, Mr. Vance, no questions that I see. Thank you for that. We'll turn to Director Stenzrud with SERS.
Good morning, Mr. Chairman, members of the Council. The CERS 2025 audit report has been provided in the format required. We have outlined the various topics, current year completed audits with recommendations, prior years completed audits with updates to recommendations, current year completed audits with no recommendations, active audits and other audit-related activity. I would note that the CERS audit committee met six times during the year.
They regularly meet quarterly, but there was a recruitment and replacement of the chief audit position at CERS, so there was a couple of additional meetings for that purpose. I would note that of the two most recent audits were IT-related, one related to the internal controls related to infrastructure, the second related to identity and access. These were audits commissioned by management for the purpose of testing testing to confirm that some recent developments and improvements that we have been making to our systems were in fact working and are sufficient. We identified a couple of things that we want to work on, and we have completed work on most of those. We have approximately one or two still to wrap up. But overall, the audits concluded that the current structure is working effectively. And with that, I'd be happy to answer any questions. Mr. Stenswood, I see no questions. Thank you for your reports. and last internal audit report is from Highway Patrol.
Thank you, Chair Byrd and members of the Retirement Study Council. The 2025 HPRS internal audit report is in your materials and can also be found in the ORC website. The internal audit function was performed by Summit County Internal Audit Department, which focused on the key areas identified in the 2024 risk assessment, which are purchasing and expenditures, revenue, payroll, ORC compliance, investments, and human resources. Six issues were identified overall, five of which were quickly resolved and the details reported in your materials. One item remains outstanding, with continued progress towards resolution, and has to do with policies for recalculation and monitoring of investment manager fees. Ray and Associates, a financial auditor, selected by the auditor of state, conducted a financial audit of HBRS and presented an unmodified opinion, finding no material weaknesses or deficiencies. And that concludes my comments on the internal audit report and I'd be happy to answer any questions from the Council.
Thank you Mr. Bradshaw. When Mr. Bradshaw I see no questions. Thank you for your internal audit report which leads us to the next budget, I'm sorry the next item on the agenda which is budget presentations and first is STRS and Director Toole and just a reminder to members of the council that they are presenting budgets for the purposes of informing us Thank you
sir. Thank you, Mr. Chair. Members of the council, pleasure to be here. First thing I want to do is just highlight this past year our budget was $129 million. We're expected to wrap up the end of the year, probably about $6 to $7 million under budget. So we want to make sure we share that. We did see significant achievements with that budget. We saw fantastic work with our governance consultant. We're improving a lot of things around our governance with our board, and we're doing a lot of great work there and getting a lot of policies and charters in place with that money. We also implemented a sustainable benefit framework, which puts guidelines around how our board will operate going forward and how they will manage benefit enhancements, but also at the same time trying to make sure we save dollars to improve the long-term fiscal sustainability of the fund. And so half of that money, once we get above the de minimis, will go to the fund, half will go back to increasing benefits, and it's a much more structured way and a governance way of doing that, and it puts us on track to reach 90% funding in 10 years, which is an important milestone for us. We also have a situation with our record-keeping system called STARS, and we've kicked off work there. Our current contract expires at the end of 28, so we've got to figure out are we going to hire someone externally or are we going to bring it internally and manage the rest of it. We manage internally about 80% of it, so there's work there undergoing how we're leveraging that budget as well. And then the other thing you guys proved last year as part of the budget was our risk modeling software and our investment team, and they're making good progress there. So now what I want to do is move on to fiscal year 27, and the budget requests of $141 million, it's over a 9.8% increase. It's not small. I get it. But I'm here to tell you I've been here 10 months, and I want to share what I found and what the team has found and how we're trying to address it. So the budget is designed to address three things. Critical back office processes that today are reliant on people and what we want to do is shift that to an accumulated, we've developed an accumulated technical debt that we have to address. So between our finance department and our investment department, we've got to fix that. Today we're reliant on people and Excel spreadsheets. The budget supports a deliberate phase shift from manual, people-dependent processes to resilient, scalable systems supported by skilled associates. The other key thing that we found is we have key succession risk. Eighty percent of our leadership can retire in the next five years, and we've lost hundreds of years already, and they're just walking out the door. So when you're manually intensive, that raises that risk. And almost 50 percent of our staff can walk out over the next five years and collect their retirement from OPERS. So over 77 percent of our fiscal year 27 budget proposals are really driven by personnel, everything related to personnel, salary, benefits, OPRS, contributions, things like that. Included in our budget is a 4% merit pool for our associates, as recommended by our compensation consultant, CBiz. There is a narrative out there that our budget means that our associates are getting a 9% merit. That's not happening. We're going to manage the 4%. We're not going to do a flat percent. we believe in pay for performance And for those people who are performing well we give them a little extra If you not doing your job very well we going to give you less and maybe zero We not going to do a 4 flat across the board It just not healthy Our proposed budget includes nine new FTE. I would note that from the early 2000s, when we were at 732 people, we are now down to just over 500 associates. So a good drop of over 200 people in the building. One of the things we're trying to manage is that succession risk, right? So one of the things in our budget is we call it continuity planning dollars. And what that is is that we're going to give money to HR. When someone tells us they're going to retire, we're going to give money early to someone to replace that person three to six months. So they're sitting there alongside of them and learning the job. And then once the person retires, we won't replace it because we already did. So it's not a way to grow the headcount. It's just a way to manage that succession risk that I talked to you about. I've also learned in previous roles, and we're leveraging it here, there's value in temporary employees. There are jobs that make sense to leverage temporary employees, and it greatly reduces the benefits. So that's something we've introduced this past year, and we're leveraging more of that. Our professional technical services represent our investment subscriptions and system-wide consultants designed to focus on automation, de-risking, and efficiency. and that supports our intent to become more tech-focused. All of our other operating expense really includes software licenses. We leverage AI tools where it makes sense, IT equipment maintenance, cybersecurity, travel, and some other miscellaneous items. All in, our net position, our budget proposal, is an expense of 13 basis points on the assets. On the capital budget side, it's an increase of $1.4 million. It provides major support for our IT initiatives, computer equipment, capitalized software, and our subscription costs. The subscription costs continue to rise along with our health care. And there are a couple things we've got to do to the building from an HVAC and from a sprinkler head perspective. Investment support risk modeling software, we're looking to deploy that next year, most likely in the first quarter. So that's going well and some other software tools. I know in the packet is some investment overview. You saw a little bit on that. I would like to touch on that for a second. You know, STRS investments historically been both high returning and low cost, which is really important. Though neither outcome guarantees the other, achieving both low cost and strong performance simultaneously is the mark of a high performing investment organization. As a source of revenue, this is an important point when you think about pension plans nationally, STRS Ohio relies more on investment earnings and employee contributions than the average plans across the country. Employer contributions, we all know they're locked in at 14%, and with what's going on in public schools and the cuts, it certainly makes sense that it's going to be very difficult to raise that in any near future. The investment earnings, though, contribute 65% towards all of our revenue on an annual basis, and that's compared to a national plan of 59%. So there's much more emphasis on the investment earnings. And when you look at the employee contributions of 14%, that compares to a national average of 12%. So our members are contributing more, and our investment earnings are contributing more, which really keeps our funds sustainable. we have strong long-term net total fund as you as you saw earlier our five-year we the fifth percentile among our peers on a national basis and our relative basis were 43 basis points above our benchmark On the 10 year that ninth percentile so we the ninth best in the country amongst our peers and we're 30 basis points above the benchmark. 20 year, we're fifth percentile, top five in the country percent, and 11 basis points above the benchmark. STRS manages approximately 69% of all of our investments with the internal staff, And since we're internally driven, in the past year we saved $145 million when you compare outsourcing that to a third party investment manager. And if you look at that from 2003 to 2024, that's $2.3 billion that we've saved by managing the money internally. And not only are you managing internally and saving the cost, but you're getting the returns. So it's a win-win. So in closing, I get it. It's, I've heard it, but at the same time, I got a lead, and I got, there's things I need to fix with this system, and we need to, we're in a transition period for the next two to three years, and we need to make progress. So we got to close that heavy labor dependent with significant institutional knowledge, eligible to retire in the next few years. We know the investments we need to make to manage the risk. We've been very thoughtful and deliberate in building out this budget, and we believe our budget strikes the right balance between fiduciary discipline and organizational responsibility. Happy to answer any questions you might have.
Thank you, Mr. Toole. I'll start the questioning by looking at page one with the personnel salaries and wages. It says a 9.2% increase on that. I know you addressed that a little bit, but certainly I think there will be concerns out there in regards to that number. And can you try to take another swipe at explaining why 9.2%?
Let me look at that.
Can you tell me again, sir, with a... Yeah, I'm looking at page one. Personnel salaries and wages, 9.2% increase. You talked a little bit about that before, but can you run that past me again? That's a tough number to see.
Yeah. Yeah.
Salary and wages, 9.2%.
So, where's Kevin? Right here. You want to help me out with that one in detail? Come on up.
This is Kevin DeVries.
He's our interim CFO.
Welcome, Mr. DeVries. Thank you, Mr. Chair and counsel. Yeah, the 9.2% includes the 4% merit that Mr. Toole already described, but also encompasses some FTE ads from the nine that are for fiscal 27. And the way we've handled our budget, there was 14 last year, and we budget roughly 60% of that salary in the fiscal 26 year because they're not necessarily hired on 7-1 of the year. And so that remaining 40% gets rolled into this fiscal 27 budget. And PPI is in there, right? Yep. Okay. Thank you for that. What about – I'm very thankful to hear that we've reduced the number of employees over the last couple of years by, I think I heard 200. What was the reason for advocacy nine more positions. If you're getting it done with what you have, why are we adding nine? You got the details on that? Yeah, so there's the retirement risk is part of it. So as we have senior level people leave with years of experience, sometimes when those people leave, we need more than one person necessarily to replace that production. And so it's kind of this transition period as we have a lot of senior people leave. There's certain production and responsibilities that take more than one person, especially as we're implementing new systems. So we have an investment accounting system that is being implemented in several phases, and that takes dedicated resources to implement the system while you're also having other people run the system on a day-to-day basis. Well, I hear your answer. I personally don't like the fact that we have to replace one person with two. I don't swallow that easily. Is there any other questions from members of the council?
Representative Plummer. Thanks, Chair. you're implementing new technology have you guys done a study on how many bodies we can replace once the technology is in place and up and running? Sounds like a lot of people are sitting around bean counting we can eliminate some of those counters with technology you got a projection on future personnel cuts? Go ahead
we don't have specific projections in terms of numbers of reductions but that is certainly a possibility as we get the systems implemented and we see the efficiencies from there, there definitely will be opportunities to reduce headcount in certain areas.
Representative Brennan. Thank you, Mr. Chairman. Thanks for being here, gentlemen. So to kind of piggyback off the last couple questions, again, I think you had mentioned that, you know, I can't remember what year it was, but there were 732 FTEs. Now we're around 500. So, but it's increased slightly over the last several years. Are we where we need to be with this budget, or do we anticipate more or less going forward? Because once the folks that are matriculating leave and you've got the new folks onboarded, it would seem to me that things would start to level out. But I don't know what other retirements of senior staff you're anticipating over the next five years.
I think there will be a couple-year transition period where we might see some ups and downs in terms of headcount. Recently, we've seen a big increase in the number of service retirements, which also increased the number of counseling sessions, the number of calls coming into the call center. So we've had to up that a little to meet and maintain service levels for our members. That might settle out as well in a couple years, but we'll have to see how that plays out.
Follow-up. Follow-up. So earlier I asked a question about AI. So are we using AI at all anywhere in STRS or any of our vendors, and what's the future for the use of AI? I know we can predict it per se but what are your thoughts on that moving forward regarding investments and other ways Yeah we are definitely using AI And the main – we're going slow.
We don't want to lead the country on this. We're taking a pragmatic approach and being smart about it and really understanding where it can provide benefits. We have co-pilot licenses, which help us from an executive leadership team perspective to do our work and manage our workflow. The other thing we recently launched was all of the emails that come in. We used to have people that would segment those emails and send them on appropriately. Now we're using AI to do that, and it's saving us two weeks a month for an associate time. So that is the biggest benefit we've seen. I think it will continue to evolve, and you will continue to see how it helps us do our work better and smarter and helps us control our cost from an FTE perspective, for sure.
One more, Mr. Chairman, if I may. Please continue. Thank you. So obviously STRS retirees like myself and a couple other members of this committee, along with our fellow retirees around the state, are concerned about fiscal discipline, which is why we exist here as a council. So what areas of the budget did you consciously choose not to increase this year that maybe you could have argued could have been increased?
We definitely cut back on the number of people that we think are going to retire and have someone work alongside them. The challenge was that we don't know when people are going to retire, and we can't ask them when they're going to retire. Legally, you can't do that. So the approach that we took was let's see the AG shaking his head yes, so that's good. But the idea is that we've got to build relationships with people where hopefully they'll tell us that I'm going to retire. and then we get able to fulfill that.
And I don't, which makes sense to me, because you don't want to hire someone early, and then they're sitting there for a year or two learning the job. It just doesn't make sense. Thank you. Thank you, Mr. Chairman.
Yes, turning now to Dr. Patajew.
Morning, gentlemen. Thank you for being here today, too. So, Mr. Trevees, you may have answered this already, but I'm looking at the, so just if you go to salaries and wages, is I'm back to my superintendent's hats back on. I'm trying to understand the numbers. You have a fiscal 2026 budget amount of $77 million, but your estimated actual currently is at $71 million. So can you explain those two numbers? You may have already explained this, but could you explain that again? Why are we at $71 million estimated and the budget is at $77 million?
Yeah, I want you to touch on that. Yeah, there's two key pieces to that. One is the performance-based incentive for investments. So there's a certain dollar amount based on the performance of the system that gets paid out. We had budgeted around $9.6 million, and that came in around $6 million, so there's about $3 million in savings there. and then the other big piece were open positions during the year. So we had budgeted positions, but they weren't filled, so there was a lot of dollar savings during the year while we trying to fill those positions Follow up Follow up Yes Please continue
And so the 9.2 that the chair spoke to, that increase is off of the $77 million. Correct. Not the 71 that you currently are at, because you're projecting that those savings might not be there next year. Exactly. Is that correct?
Yes. Okay.
This may be a tougher question because I'm trying to get a handle at the 9.2%. Please continue. This is the question. So you mentioned the 4% merit is part of that number. You mentioned the FTEs is 9. Now I'm putting my superintendent hat on. So line item employees, right? And this is where people will probably ask that question. So I'm not in line for merit, but I'm in line for an increase. What's the average increase across all members then if they're not getting merit that's in that 9.2?
Or is there everybody's getting 4%? No. It's a performance-based kind of merit system. So there will be a wide range from some that might be zero to some higher than four. but the average overall for all of SDRS would be four, but it's not a set. There's not like a set, you know, with the school districts where you get maybe a 2% increase on the salary schedule, plus you can also move up a step. So there's no set like 2% increase. It's all performance-based in that 4% based on annual reviews. And, again, it could be from zero to higher than four if you're really knocking it out of the park. they would get more, but overall we stick to the 4% average for the system.
Please continue. One last question. So the difference between the 4% and the 9.2, that 5.2 that's left, is that the FTE piece that we're talking about?
The vast majority of it, yes. Okay. Yes. All right.
Turning to Representative Plummer. Thanks, Chair. Let's look at the travel budget. an increase of 25%. What's that for?
Training your new employees? That's a pretty substantial jump as well. Yeah, most of that is from our investment team that is traveling and visiting fund managers and different types of investments. We're slowly getting back to the pre-COVID travel budget line item that we used to have. so increased it's across the board I don't want to label it all for place all investments but a lot of it is our investment department
follow up any other questions from
members of the council I guess I would conclude our questions by making a statement that the overall total operating budget increase at the bottom is 9.8% and you know you have three STRS members on this council and I have to, I can't speak for all of them, but as one person, that's a concerning number to me. And, you know, to see a very large increase in salaries and wages, that's a very, that's definitely a concern to me. And I hope that the STRS board will take a strong look at these numbers before approving them. And I'll conclude my remarks with that. Thank you very much, gentlemen. Thank you. Next is the budget presentation with SERS and Director Stunsrud
Thank you, Mr. Chairman, members of the Council. We have provided you with the SERS budget information in the requested format. I will cut to the chase. 2.4% increase of that. I would note that but for a fiduciary audit payment that we are making for the purpose of doing your fiduciary audit, that increase would be 0.7%. So we feel that we have done a good job of holding the line on the budget. I think that we've tried to provide you with information. I'll speak to my presentation materials if I might. They are on your iPads. What we try to do, as always, is to start off by noting some of the things that were accomplished with the budget this past year. We noted that we have made some changes. We completed an actuarial experience study. We have completed a bank clearing project. We have changed and completed a master record keeper conversion on the finance side. We are two years into our five-year strategic plan. Turning then to page 3 of the slide deck, you will see that we continue to put a lot of emphasis on technology and information security as a source of expenditures within the budget.
Again, the idea is to try to increase efficiency. And I would just say, anticipating the possible question on AI usage, at CERS we have a very conscientious and careful approach towards AI. We have established an AI oversight committee that is responsible for reviewing and considering all potential applications of AI within CERS. Thus far, we are crawling, walking, and running into the subject matter because we think that's the prudent way to do it. And we have thus far identified, as Mr. Toole mentioned, co-pilot as a tool for a lot of administrative, executive-type activities. but we're also then looking at ways to utilize AI tools for the purposes of software development and testing. But we will continue to look at opportunities, weigh them, measure the risk before we do anything with respect to AI. At the end of the day, our objective, our view is that AI is there to supplement the outstanding personnel we have at CERS, freeing them up to give more touching and hands-on assistance to our members. And that's going to be our objective. I have also indicated a few of the upcoming projects in 2027. Again, the aforementioned continued focus on technology and security. We are looking to make sure that we continue to offer upgrades and tools to make it easier for our members to interact with SIRS electronically and not simply have to make calls or show up in the office. So we are investing in that. On the next slide, page 5, we have given you some of the numbers by budget category. Again, you can see that it is a very modest increase year to year. The budget drivers, some of which I have mentioned already, the 2.4% increase, we too are utilizing a 4% merit pool for the purpose of bringing merit-based payroll adjustments. We do not do step increases. We do not do cost of living increases. And the merit process is very similar to what Mr. Toole outlined. It is truly based on performance, so not everybody is getting that 4%. We are expecting some increased costs for health care benefits at SERS, and so that's a driver in the personnel category increase. Professional services, we are seeing some fiduciary performance audit cost, as noted, and then we are also looking at some communication expense increase related to conducting an election and the fact that postage keeps going up. In the next slide, beginning on page 7, we have broken down those personnel categories and provided a little bit more of a drill-down look. Personnel services overall is a 3.5% increase. That is 66% of the budget, aforementioned 4% merit pool, health care costs. On the professional services, we're looking at a 5% increase within that budget category. That is 16.5% of the total budget, pushed up a little bit by the fiduciary audit, downward pressure, cost savings in banking and custodial fees, and also related to the aforementioned master record keeper conversion. On page 8, we talk about the communications category. That is 14.4%, again, driven by the election and postage costs. We continue to invest in member education and engagement. On the other operating category, that's going up by about 10.3%. That's 12% of the total budget. And again, they're primarily a computer software focus. On slide 7, the net building occupancy expense is going down by 38.5%. That reflects the fact that we have completed tenant improvements in order to fill vacant space, and so we are at nearly 100% occupied now in terms of our available tenant space. On slide 10, I wanted to provide a little information regarding our technology roadmap. This is a five-year plan in which we identify a path forward, projects that will be addressed over that five-year period and the cost associated with those projects. We are coming to the end of the existing five-year roadmap. You can see we've listed out some of the things that are on tap for 2027. And finally, we have provided some information on investment expenses. I will be happy to answer any questions you might have. Thank you, Mr. Sensroad. I'm searching the room, and we have a question from Dr. Potagil.
Thank you, Chair. You mentioned, and it came up with STRS, the 4% performance-based tool. And in your notes, you said it was recommended by an independent compensation consultant.
Yes, sir.
So could you just talk a little bit about how they arrived at that 4%, where that ranks, where that puts us competitively?
Certainly. Through the chair, if I might, Mr. Parjil, we utilize the resources of an independent compensation consultant to be able to tap into the data of the markets that we recruit in and through. The objective is to make sure that our salary ranges and structure remains competitive for us to be able to attract and retain the talent we want and need at CERS. but we also rely on that consultant to tell us how the broader market is in terms of moving relative to salary growth. So they utilize data and they are drawing data that is local in nature regional in nature national in nature just depending on the positions that are being evaluated And so they bring that data to us annually for the purpose of making recommendations One is the structure recommendation. Do the salary ranges, do all salary ranges needed to be adjusted in order for the salary ranges to continue to place us in a competitive position? They also make a recommendation with regard to the salary budget growth factor. That's where the 4% comes in. So that is derived from what they're looking at across the different markets in which we are competing for talent, and again, both in terms of local geography as well as national perspective. I hope that answers your question.
Follow-up? It did, and I think the other thing I would just add and ask is, is that pretty consistent with past budgets? or is this an increase or a decrease, or is 4% seem to be pretty consistent? I don't recall in the last budgets that number.
It is coming down, if you will. Historically, the merit pool has typically been in the 2.5 to 3, 3.25 range. That obviously escalated when we went through periods of inflation, and then the labor issues that arose around the pandemic. That pushed upward on the need to raise salaries in order to stay competitive. That salary growth rate now is coming back down. And so at four, I believe we are basically just below what we were last year, and we are anticipating that next year will probably be below four, absent some sort of dislocation in the market, which puts upward pressure on us.
Follow-up? And just one final point then. Just as STRS explained too, you could have people in your shop earn a zero merit based on performance and a higher merit above four depending on their job performance for that year.
Yes, that would be a correct statement. We try not to have very many zeros because if they're zeros, they really don't have a role to play in the organization for much longer. But we do reward and acknowledge excellence, and that is something we aspire to.
Representative Plummer. Thanks, Chair. Back to the merit pay. Sounds good. Sounds like a lot of you guys are going to merit pay, 4% cap. How's that implemented? Is it an evaluation system? And what's the average across the board? Sounds good to us, but on paper, what's the numbers? Most people getting the top pay. How's it evaluated? Just kind of a process question.
We have a very rigorous performance evaluation process. That is, performance is evaluated relative to agreed upon goals and objectives for every employee. That is then reviewed on an ongoing basis during the year. Then at the end of the year, the manager supervisor of that particular employee will circle back, talk with the employee about how the performance has been, will then recommend or provide a rating, a performance rating, whether the person is failing to meet expectations, meeting expectations, or exceeding expectations. That will produce a score, if you will. Then that is done for each employee, and each one of those reviews is in turn reviewed by someone above them in the hierarchy, and I personally look at all of them. So I want to confirm that there is consistency and sensibility to what we are doing on an as implemented basis The other thing then that happens is we take that the 4 is really for the purpose of primarily identifying the size of the pool available to provide these performance recognition increases. And so if someone is simply meeting expectations, they are not likely to get a 4. They will get something below that because we will have people who are exceeding expectations. So we want to make sure that the 4% pool is sufficient to recognize both the high achievers, the people who are just meeting expectations, and then that is offset with a lower merit for people who are performing below expectations. Ultimately, we have a very small number of people who don't meet expectations and get small or no merit. We have similarly a relatively small number of people who exceed expectations and get something above a four. But overall, the four is meant to sort of designate the size of the pot available to provide those increases.
Follow-up?
Representative Brennan. Thank you, Mr. Chairman. Thanks, Director, for your report. So, you know, one of the things that's always concerned me in any institution is the loss of institutional knowledge. whether you're talking about a school building or the General Assembly or our pension systems. And one of the things I commend STRS on is that before somebody leaves, as we heard earlier, they stick around and work with their replacement so that there's a smoother transition. I recently did that with my aide that left my office. So what does your retirement landscape look like over the next five to ten years? It sounds like STRS has a pretty large cohort that's about on their way out. Are you anticipating a similar issue? And if so, do you go about it the same way as STRS as far as providing that mentorship prior to folks' exit?
Yeah. Sure, if I might. I think that the demographic profile of our workforce is probably similar in a raw respect to the STIRS workforce. We try to and are very successful at bringing good people in and having them stay for a long career, much like our employers, and that we then are seeing people just demographically aging towards retirement with enough service that they can actually then retire. So that is something that we are keeping an eye on, and there is certainly the broader demographic bubble, our version of the baby boom bubble, if you will, within the workforce. And so we do see, we expect turnover is going to pick up, but for that reason we are also making sure that we are developing a very robust approach to succession planning. and you can't plan for every possible succession, but you can have a picture of the positions that you want to make sure you have some plan for addressing and some timeline for expectations of maybe potential change. So we do look at those things. We do not typically bring someone in and work alongside someone who's already in the position, But we do very much recognize that we need to know we need to have an idea of how we going to cover any possible gap in knowledge or experience by making sure that we are beginning the process of training people to move up if that available and also then thinking about what our plans would be and how we would tackle if we need to go outside of the organization to fill. All right. Director Stinsrud, seeing no further questions, thank you for your presentation, sir. Thank you. Next on the agenda is an announcement of an SERS fiduciary audit subcommittee. And I know what you're thinking. There are three senators absent today, so that would make an obvious appointment for those who are absent. But actually, I'm going to ask this subcommittee to work on a RFP for an SERS fiduciary audit. and so Dr. Potagil, if you would be willing, sir, to be the chair of that subcommittee, we would be honored to have you. Senator Romanchuk definitely gets assigned because he is not here. And Representative Brennan, you seem to have a high capacity for additional work. Would you be willing to take that on?
Mr. Chairman, my wife would love it. I'm happy to oblige.
And so Director Stenzrode, if you would also serve with us, sir, and hopefully we can accomplish that. By the way, how is your search for a replacement going? I think the process is nearing conclusion. The board has identified a strong candidate pool, moving towards interviewing the finalists out of that pool, hopefully making a decision that in the not-too-distant future, and then in turn getting that person on board so somebody can retire. All right. Very good. How many Retirement Study Council meetings do you have left after this one? I think probably at least one, assuming that there is one in June. After the end of June, it's a we'll just have to see. All right. Thank you for that report. Now the next agenda item is the Retirement Study Council annual report from Mr. Bernard, and he is making his way to the podium. Mr. Bernard, please proceed. Mr. Chairman, members of the council, before you is the staff report, the annual report. If you have any questions on that, happy to answer them, although please, no AI questions. All right. Are there any questions from members of the council? I just said that I thought it was a call. Thank you very much. Very nice comment and compliment. All right. Thank you, Mr. Bernard. Next on the agenda is rules, and for that we will turn to Mr. Hennigan. So Mr. Hennigan, please continue or start. Mr. Chairman, members of the council, I did want to bring to your attention STRS Rule 3307-1-7-01. It should be the first rule on your memo. Late yesterday, STRS staff informed us that the rule was refiled at the request of JCAR due to a technical cross-reference issue. That being said, we will present this rule again to the council at its next meeting along with an updated draft, meaning that you'll see the same rule number again. That being said, ORSC staff have reviewed the rules. They are in line with the revised code, and we have no further comments. All right, Mr. Hennigan. Is there any questions for Mr. Hennigan? Seeing none, sir, thank you for the rules report. And under Old and New Business, I'm going to turn to Director Rhodes, who would like to talk to the council for a minute. Thank you, Mr. Chairman. Members of the council, I, like many individuals, live in a community with an HOA. And some of my neighbors and so-called friends have asked me if I would be interested in perhaps taking a position on our HOA board. While there is no direct conflict, it would require me to take on a fiduciary duty. Therefore, I wanted to know if there would be any opposition from the members of the council. No opposition, but certainly hesitation on my part. I thought Retirement Study Council was conflicting and difficult enough. You want to jump into HOA. From the frying pan into the fire. All right, well, good luck with that. We're getting close to the end here, and I also want to make mention that Marla Bump is closing in on the end of her tenure, and Ms. Bump is in the audience again, and thank you so much as an STRS retiree for your service to STRS So thank you very much Anybody else in the room have anything positive Representative Brennan Real quick So as I alluded to in some of my questions today, I'm like I think everybody concerned about, I see the positives and negatives of AI in the future, and I'm just throwing it out there for something for everybody to think about as far as maybe requiring every three, six months, or maybe even yearly from each of the pensions sort of an update on their use of AI internally and maybe even with their vendors, just so we have a clear view of where that's going, what impact it's having on personnel, on investments, and all the other things that they do. So just throwing that out there for food for thought for future discussions, Mr. Chairman. Thank you. Thank you. And I would caution, I do not believe the Marla bump can be replaced by AI. Okay. So, yes. So we are planning at this point to have a next meeting in June. That would be June 11th. And we look forward to seeing everyone there. So at this time, we are adjourned. Thank you, everyone.