Pension Review Board adopts updated investment‑practice guidance, flags three fire systems' return assumptions
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Summary
The PRB voted to adopt updated guidance for investment practices and performance evaluations and pressed three fire plans using 7.75%+ return assumptions to reassess those assumptions; staff will follow up with letters to actuaries and sponsors.
The Pension Review Board adopted updated guidance for conducting investment practices and performance evaluations on Nov. 7 and used the discussion to press several local fire pension plans to reconsider optimistic investment assumptions.
Robert Munter, presenting the investment‑practice and performance evaluation guidance (documents behind tab 7b), said staff updated the PRB schedule and guidance following statutory changes and feedback from systems. "We have all of the updates to the draft as a red line version as well as a clean version, so that's easier to see and read as to what it should look like in the final version," Munter told the board.
Board members made a motion to adopt the guidance and the motion passed. The motion text before the vote requested adoption of the updated guidance for conducting investment practices and performance evaluations "as presented." The board recorded affirmative votes and "the ayes have it" (motion adopted).
The adoption occurred alongside a deeper investment data discussion. Munter reviewed updated performance and fee data and a targeted capital‑market analysis of three systems that carry 7.75% (or higher) return assumptions — Harlingen, Orange Fire and San Angelo. Staff compared plan asset mixes and consultants' long‑term capital‑markets assumptions (using vendor surveys such as the Horizons Actuarial Survey) and found those plans' assumptions lie at or near the optimistic end of vendor ranges.
Actuarial and investment‑policy concerns drew strong comments from board members. One board member said, "These plans are basically overstating their funding condition and understating their cost," and several members urged staff to send letters to plan sponsors and actuaries asking for reconsideration or explanation. Another member said the board would "escalate and elevate the issue" if plans did not act.
PRB staff said they will: (1) finalize the guidance adopted by the board; (2) send formal correspondence to the three plans and their actuaries expressing PRB concerns about the reasonableness of their return assumptions; and (3) continue collecting voluntary quarterly investment reports and benchmark comparisons to refine oversight metrics.
The adoption and the board's follow‑up will be reflected in next steps from the actuarial and investment committees.