Tag: Pennsylvania

Pennsylvania lawmakers mull pension reforms as PSERS remains under scrutiny

Mary Pat Campbell

Link: https://www.timesleader.com/wire/state-wire/1535867/pennsylvania-lawmakers-mull-pension-reforms-as-psers-remains-under-scrutiny

Excerpt:

State lawmakers met with officials of Pennsylvania’s public pension funds Thursday to vet reform measures that have been introduced to increase transparency and oversight of the pension system.

The measures are working their way through the legislative process and could be considered for passage this year. Thursday’s hearing offered participants a chance to voice concerns or probe for costs and conflicts that could derail the measures.

….

Among the proposals reviewed by pension officials and legislators was a bill that would force the funds to more closely track more than $1 billion of annual investment manager fees, and profit-sharing and other money-management costs. The measure would also require video copies of hours-long board meetings to be made publicly available — online for three years, and then by request.

Author(s): Joseph N. DiStefano

Publication Date: 21 Jan 2022

Publication Site: Times Leader

Board members of Pa.’s largest pension fund asked to sign secrecy oaths

Mary Pat Campbell

Link: https://www.witf.org/2022/01/21/board-members-of-pa-s-largest-pension-fund-asked-to-sign-secrecy-oaths/

Excerpt:

Leaders of Pennsylvania’s beleaguered teachers’ pension fund are requesting that board members sign oaths of secrecy before receiving a critical update on the botched investment calculation scandal that has led to multiple federal investigations.

On Thursday morning, the chairman of the Pennsylvania Public School Employees’ Retirement System board told members in an email that they must sign a yet-to-be-drafted non-disclosure agreement to participate in a closed-door meeting later this month.

The meeting, scheduled for Jan. 31, is pivotal: Board members are poised to be presented with the findings of a taxpayer-funded inquiry into an investment calculation mistake in late 2020 that wrongly spared teachers a potential hike in their pension payments, leaving taxpayers to make up the difference over time. The calculation was later fixed, and teacher payments increased.

The inquiry was conducted by Womble Bond Dickinson, a law firm hired by the board last year to conduct an internal investigation into the error as PSERS coped with the federal probes. The system has agreed to pay Womble up to $367,600 in fees for its work, with partners collecting up to $695 an hour.

Author(s): Angela Couloumbis of Spotlight PA and Joseph N. DiStefano of The Inquirer

Publication Date: 21 Jan 2022

Publication Site: WITF

This Local Pennsylvania Police Pension Fund Is About to Run Out of Benefits. How Did That Happen?

Mary Pat Campbell

Link:https://www.ai-cio.com/news/this-local-pennsylvania-police-pension-fund-is-about-to-run-out-of-benefits-how-did-that-happen/

Excerpt:

But of all the struggling pension funds in Pennsylvania, the pension system in the city of Chester was shown to be the most underfunded municipal public pension plan in the entire state in 2019. And now, that situation has gone from bad to worse.

Reports say the pension will run out of money in less than four months, according to Philadelphia’s PBS station, WHYY. One of the primary reasons for this situation appears to date back to 2009, when the pension board adjusted the pension calculation procedure. These adjustments seem to have made it easier for some police officers to spike their pensions.

Under the 2009 change, police officer pensions in Chester were calculated using the salary of the final year of service, which may have encouraged some officers to work overtime as much as possible in their final year in order to inflate their pensions, according to the state’s appointed receiver. In October 2021, this rule was changed so that calculations will now be based upon the last three years of service. 

This one-year policy, combined with the practice of spiking among approximately 80 police officers, appears to be the cause of the pension system’s lack of funding. Officials are hoping to recoup some of the overpayments to retirees, and they are expecting future payments to be reduced significantly.  

Author(s): Anna Gordon

Publication Date: 10 Jan 2022

Publication Site: ai-CIO

Two Top Pennsylvania Pension Fund Officials to Retire Amid Federal Probe

Mary Pat Campbell

Link:https://www.wsj.com/articles/pennsylvania-pension-cio-jim-grossman-to-resign-amid-federal-probe-11637243641

Excerpt:

Two top officials at Pennsylvania’s largest pension fund are retiring amid a federal investigation and calls by some board members for their ouster.

The board of Pennsylvania’s $64 billion Public School Employees’ Retirement System voted Thursday to approve resolutions accepting the retirement of Glen Grell, the executive director, and Jim Grossman, the chief investment officer. Board members approved plans for both men to stay on in temporary advisory positions and authorized the board chair to begin a search for their replacements.

The fund has been racked by turmoil since board members learned in March that a report of investment returns was too high. The accurate figure was low enough to trigger an increase in payments from employees that the plan serves. Investigations conducted by the fund haven’t found wrongdoing on the part of investment staff.

The board said in April that it had hired law firms to investigate the miscalculation and to respond to a federal grand jury subpoena requesting documents. The pension declined to comment on what information the grand jury is seeking.

Author(s): Heather Gillers

Publication Date: 18 Nov 2021

Publication Site: Wall Street Journal

Private equity investments continue to pose challenges for public pension plans

Mary Pat Campbell

Link:https://reason.org/commentary/private-equity-investments-continue-to-pose-challenges-for-public-pension-plans/

Excerpt:

Private equity investments lack transparency and are difficult to value. As opposed to publicly traded securities, limited partnerships used by private equity managers can’t provide frequent performance updates and, as a result, advise stakeholders after the end of each fiscal year. This leads to a lag in reporting important details. Moreover, shares of companies owned by private equity funds are not publicly traded, meaning that their values can only be estimated, which is subject to potential bias. Private equity firms are also not obligated by the law to publish their lists of assets in accordance with Securities and Exchange Commission rules. While this information can be found on Bloomberg Professional Terminal, it is not available to the general public. This lack of transparency should be concerning to employees and retirees who rely on these funds and taxpayers who contribute to them.    

For the Pennsylvania teacher system, the management fees associated with private equity investments that the plan had to pay over the past four years ($4.3 billion) are more than the total amount members paid into the plan during the same time ($4.2 billion). The pension plan recently announced that member contributions will have to be raised going forward because of long-term investment results below the plan’s benchmark. As a point of comparison, the New York State Teachers’ Retirement System, which has double the assets of PSERS, reported 36% less in total investment fees and expenses than PSERS.

Author(s): Jen Sidorova

Publication Date: 12 Oct 2021

Publication Site: Reason

Wall Street Links to Pennsylvania Pension Fund Probed by SEC

Mary Pat Campbell

Link: https://www.bloomberg.com/news/articles/2021-09-29/wall-street-links-to-pennsylvania-pension-fund-probed-by-sec

Excerpt:

A $66 billion Pennsylvania state pension fund under scrutiny for errors in calculating investment returns has been asked by securities regulators to turn over records related to possible gifts exchanges with dozens of Wall Street firms, according to a subpoena reviewed by Bloomberg.

The U.S. Securities and Exchange Commission issued the subpoena Sept. 24 to the Pennsylvania Public School Employees’ Retirement System, demanding information about the fund’s dealings with firms including Blackstone Inc., The Carlyle Group Inc., Morgan Stanley, Apollo Global Management Inc. and consultant Hamilton Lane Advisors. 

SEC Enforcement Division Senior Counsel Heidi Mitza asked that the pension fund supply “all Documents and Communications Concerning any compensation, remuneration, money, gifts, gratuities, trips or anything of any value” exchanged between representatives of investment managers, advisers, and consultants and any representatives of PSERS or the state, according to the subpoena. 

Author(s): Neil Weinberg

Publication Date: 29 Sept 2021

Publication Site: Bloomberg

Report: Teacher pension error traced to single miscalculation in April 2015

Mary Pat Campbell

Link: https://www.thecentersquare.com/pennsylvania/report-teacher-pension-error-traced-to-single-miscalculation-in-april-2015/article_34d84a56-c306-11eb-a252-4b78895ea004.html

Excerpt:

The calculation error that upended the state’s largest pension fund has been traced back to a single month in 2015, according to an investigation from Spotlight PA.

The discovery came to light in a trove of documents obtained by reporters that found a tiny discrepancy that boosted the $64 billion Public School Employees Retirement System (PSERS) by a third of a percentage point in April of that year.

The consultant firm hired to review PSERS’ investment returns between 2011 and 2020, ACA Compliance Group, performed limited checks that skipped over the month in question, according to the report. The company that crunched the actual numbers, Aon, blamed the discrepancy on a data entry error.

No matter the fault, the miscalculation unraveled PSERS’ rate of return, dropping it from just above the mandated 6.36% threshold to prevent a contribution increase down to 6.34%. Now, about 100,000 workers who joined the system in 2011 or later will pay more beginning on July 1.

Author(s): Christen Smith

Publication Date: 1 June 2021

Publication Site: The Center Square

Pennsylvania’s Biggest Pension Racks Up Costs After Misreporting Returns

Mary Pat Campbell

Link: https://www.wsj.com/articles/pennsylvanias-biggest-pension-racks-up-costs-after-misreporting-returns-11620990002

Excerpt:

The board of trustees overseeing the $62 billion Pennsylvania School Employees Retirement System has spent more than $1 million so far to investigate and contain fallout from an inaccurate report on investment results delivered late last year. The report led to a mistaken conclusion that no increase in employee pension contributions would be needed this year.

The system’s trustees have hired batteries of lawyers since the mistake was revealed. The board said in April that it had hired law firms to conduct an investigation into the miscalculation and to respond to a federal grand jury subpoena requesting documents. It couldn’t be determined whether the subpoena relates to the miscalculation.

…..

However, in March the pension system said that the actual nine-year return came to 6.34%, triggering an increase in employee pension contributions reportedly affecting some 100,000 workers whose contributions will increase by 0.50% to 0.75% starting July 1. For instance, a school worker who earns about $45,000 annually would have roughly $8.65 withheld from each biweekly paycheck, the system’s website explains.

Author(s): Preeti Singh

Publication Date: 14 May 2021

Publication Site: Wall Street Journal

FBI Said to Seek Evidence of Kickbacks, Bribery at Pennsylvania PSERS

Mary Pat Campbell

Link: https://www.ai-cio.com/news/fbi-said-to-seek-evidence-of-kickbacks-bribery-at-pennsylvania-psers/

Excerpt:

Subpoenas indicate that the FBI and federal prosecutors are seeking evidence of kickbacks and bribes in an investigation of the $62 billion Pennsylvania Public School Employees’ Retirement System (PSERS)’s misstatement of its 2020 investment performance and its real estate investment in Harrisburg, Pennsylvania, according to The Philadelphia Inquirer.

In December, PSERS’ board of trustees certified the contribution rates for its members. The board was told by its general investment consultant and another firm that the retirement system’s nine-year performance figure was 6.38%, which was just high enough to avoid triggering additional contributions under state law.

……

The court orders reportedly reveal that the FBI and prosecutors are investigating possible “honest services fraud” and wire fraud. Under a 2010 US Supreme Court ruling, federal prosecutors need proof of illegal payments to seek criminal charges against state officials for not providing honest services, the Inquirer reported.

No one at PSERS, including the executives who received subpoenas, has been accused of any wrongdoing.

And according to a report in The Wall Street Journal, PSERS’ board of trustees has spent more than $1 million and counting in its investigation of the reporting error.

Author(s): Michael Katz

Publication Date: 19 May 2021

Publication Site: ai-CIO

PSERS bet big on this scrubs brand whose IPO boosted a Steelers owner’s billions

Mary Pat Campbell

Link: https://www.inquirer.com/business/figs-scrubs-psers-steelers-tull-ipo-20210602.html

Excerpt:

Figs Inc., which sells stylish hospital scrubs, has pulled off a successful public stock offering that has enriched a Pittsburgh investor along with Pennsylvania’s beleaguered school pension fund and other early backers, at least on paper.

Investors’ appetite for attractive new stocks appears to have paid off for Thomas Tull, a billionaire tech investor and Steelers part-owner, by more than $20-$1, while quadrupling the PSERS pension fund’s investment — if it can cash out its shares at today’s bullish prices.

Early private investors typically face a “lock-up” period, often six months, before they can sell all shares. The stock could gain value or crash before the shares are sold.

Still, a big Figs payday would be a boost to beleaguered PSERS chief investment officer James Grossman. His team’s complex and often secretive investments have been criticized by a growing reform faction of PSERS trustees who say the fund could do better in low-cost index funds.

Author(s): Joseph N. DiStefano

Publication Date: 2 June 2021

Publication Site: The Philadelphia Inquirer

Internal PSERS documents show how Pa’s biggest pension fund got key financial calculation wrong

Mary Pat Campbell

Link: https://www.inquirer.com/business/psers-pension-error-mistake-teachers-fbi-20210530.html

Graphic:

Excerpt:

After Pennsylvania’s biggest pension plan botched a crucial financial calculation, the FBI launched an investigation, the fund’s board began its own probe, and 100,000 public school employees suddenly faced paying more into the retirement system.

Now The Inquirer and Spotlight PA have obtained new internal fund documents that shed light on that consequential mistake. The material traces the error to “data corruption” in just one month — April 2015 — over the near-decade-long period reviewed for the calculation.

The error was small. It falsely boosted the $64 billion PSERS fund’s performance by only about a third of a percentage point over a financial quarter. Even so, it was just enough to wrongly lift the fund’s financial returns over a key state-mandated hurdle used to gauge performance.

The documents reveal that a fund consultant, Aon, blamed the mistake on its clerical staff for inputting bad data. The material also shows that even though the fund hired a consultant, the ACA Compliance Group, to check the calculations, the consultant made only limited checks, and skipped over the month with the critical errors.

Author(s): Joseph N. DiStefano, Craig R. McCoy, Angela Couloumbis

Publication Date: 30 May 2021

Publication Site: Philadelphia Inquirer

Teachers union demands leadership changes at embattled PSERS pension fund

Mary Pat Campbell

Link: https://www.post-gazette.com/news/state/2021/05/21/Teachers-union-demands-leadership-changes-at-embattled-PSERS-pension-fund/stories/202105210131

Excerpt:

A union that represents 61,000 schoolteachers statewide called on most of the board of the Pennsylvania State Employees’ Retirement System to resign amid an ongoing FBI investigation.

“Through alleged errors and omissions, and under a shroud of secrecy, this PSERS Board appears to have jeopardized the present and future financial security of our Commonwealth’s most dedicated public servants,” Arthur Steinberg, president of the Pennsylvania chapter of the American Federation of Teachers, wrote in a letter to PSERS board members.

In the letter, Mr. Steinberg called for every board member appointed prior to January 2021 to immediately resign. That would reduce the 15-member board to two: the newly elected State Treasurer Stacy Garrity, a Republican, and state Sen. Katie Muth, D-Montgomery County.

Author(s): WALLACE MCKELVEY, pennlive.com

Publication Date: 21 May 2021

Publication Site: Pittsburgh Post-Gazette