Tag: PSERS

Many Pennsylvania state retirees say they can’t afford inflation on their stagnant pensions

Mary Pat Campbell

Link: https://www.spotlightpa.org/news/2023/07/pennsylvania-pension-public-school-state-worker-sers-psers-inflation-retirement/

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Enrollees in Pennsylvania’s two public sector pension funds — the State Employees’ Retirement System (SERS) and the Public School Employees’ Retirement System (PSERS) — haven’t seen a cost of living adjustment, or COLA, since 2004. Nearly 40 other states grant some sort of COLA to retirees.

Particularly hard hit by this lack of a COLA are the almost 69,000 former public school teachers, state government workers, and other public sector employees who retired before 2001, like McVay. On average, these retirees are in their early 80s.

They retired before the legislature increased pension benefits by 25%. The average pension for a SERS enrollee who retired before 2001 is under $15,000 annually, according to the system. That number for a 2022 retiree is more than $30,000, thanks to the increase as well as a rise in average salaries for workers.

There’s a similar gap for PSERS enrollees. A person who worked for 30 years and ended with a $30,000 salary would have a pension of $18,000 if they retired pre-2001, according to Chris Lilienthal, a spokesperson for the Pennsylvania State Education Association. Under the same circumstances, a person who retired post-2001 would have a pension of $22,500.

Author(s): DaniRae Renno

Publication Date: 27 July 2023

Publication Site: Spotlight PA

Justice Department Ends Investigation of Pennsylvania PSERS

Mary Pat Campbell

Link: https://www.ai-cio.com/news/justice-department-ends-investigation-of-pennsylvania-psers/

Excerpt:

The Department of Justice has dropped its investigation into the Pennsylvania Public School Employees’ Retirement System, said Chris Santa Maria, chairman of the $75.9 billion pension fund’s board of trustees, in a statement. PSERS made no further comment on the matter.

The pension fund had been under investigation by the Justice Department since at least May of last year, when subpoenas indicated that the FBI and prosecutors were seeking evidence of kickbacks and bribes at PSERS.

The subpoenas were reportedly looking for information from the pension fund, its executive director, chief financial officer, chief auditing officer and deputy CIO. The court orders reportedly showed that the FBI and prosecutors were probing possible “honest services fraud” and wire fraud.

….

According to a report released earlier this year following an internal investigation, PSERS investment consultant Aon took responsibility for the accounting error. The report includes a letter from Aon to Grossman that said the firm had become aware of data corruption in some sub-composite market values, cashflows and returns for April 2015.

Aon attributed the data corruption to an error by an analyst in uploading net asset value and cashflow data into the performance system it uses. The company said the data corruption impacted “a few asset class composites” in the public markets.

Author(s): Michael Katz

Publication Date: 3 Aug 2022

Publication Site: ai-CIO

Wall Street Is Fleecing a Bunch of Teachers

Mary Pat Campbell

Link: https://jacobin.com/2022/04/katie-muth-pennpsers-pensions-retirement-fund-teachers-sec-pennsylvania

Excerpt:

A new era in the decade-long battle by retirees and whistleblowers to halt massive transfers of wealth out of retirement funds and into Wall Street firms could be at hand, thanks to the case of Katie Muth.

Muth, a Democratic Pennsylvania state senator, is one of fifteen trustees who oversees Pennsylvania’s largest public pension fund, the Pennsylvania Public School Employees’ Retirement System (PennPSERS). Not long after her February 2021 appointment to the board, Muth began questioning the fund’s investments in areas like private equity, hedge funds, and real estate.

Over the past thirty years, public pension funds have moved $1.4 trillion of retiree savings into such high-risk, high-fee “alternative investments,” enriching finance industry moguls like Stephen Schwarzman of the Blackstone Group and Robert Mercer of Renaissance Technologies while often shortchanging retired public employees and teachers.

But Muth says that when she asked the fund’s investment staff for more information about its high-risk investments, she was rebuffed — so in June 2021, she sued the fund for basic information about its investments.

Author(s):MATTHEW CUNNINGHAM-COOK

Publication Date: 6 April 2022

Publication Site: Jacobin

PSERS Considers Suing Aon for Miscalculating Returns

Mary Pat Campbell

Link: https://www.ai-cio.com/news/psers-considers-suing-aon-for-miscalculating-returns/

Excerpt:

At their board meeting last week, Pennsylvania’s Public School Employees’ Retirement System voted to hire law firm Blank Rome to help determine if it should sue Aon, an investment consultant the pension fund hired.

The potential suit concerns a calculation error Aon made that caused PSERS to inaccurately report its returns in December 2020. While initially the nine-year performance figure was reported to be 6.38%, a correction showed that it was in fact lower, and thus below the threshold needed to prevent increased contributions. When the miscalculation was revealed in March 2021, the pension fund’s beneficiaries were forced to increase their payments.

PSERS paid Aon $7.2 million for investment advice over the course of almost a decade. Currently, Aon is still employed by PSERS. Both the FBI and the SEC are investigating the miscalculation. PSERS is also under investigation for gifts given by Wall Street firms to PSERS employees.

Author(s): Anna Gordon

Publication Date: 16 May 2022

Publication Site: ai-CIO

Suggested reforms for Pennsylvania’s Public School Employees’ Retirement System

Mary Pat Campbell

Link:https://reason.org/commentary/suggested-reforms-for-the-pennsylvania-teacher-pension-system/?utm_medium=email

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Despite realizing excellent investment returns in 2021, industry capital market forecasts continue to suggest persistently volatile near-term investment returns that stand to only add to over $1 trillion in current pension funding shortfalls. Most near-term investment outlooks we’ve seen from pension boards across the country predict anywhere from a 6.0 percent-6.3 percent return over the next 10 years. PSERS’ assumed rate of return was recently lowered and currently sits at 7 percent.*

PSERS’s investment outlook is similar to these broad projections. Figures 1 and 2 present the results of the Monte Carlo simulation analysis developed by the Pension Integrity Project. This iterative analysis uses 10,000 simulations of PSERS’s asset performance over 20 years, considering expected returns and volatilities of plan assets, to generate both probabilities of hitting certain returns and expected return distributions.

These findings suggest that PSERS is not likely to achieve even a 6 percent average return over the next 10-15 years—much less its current assumed return of 7 percent. This suggests there is a high probability that the public pension plan’s unfunded liabilities could get worse, not better, in the near-to-mid term. This underperformance—relative to the plan’s own return rate assumptions—will make the system’s long-term solvency challenges even larger.

Author(s): Jordan Campbell, Ryan Frost

Publication Date: 11 Oct 2021

Publication Site: Reason

PSERS Internal Investigation Into Miscalculated Returns Released

Mary Pat Campbell

Link:https://www.ai-cio.com/news/psers-internal-investigation-into-miscalculated-returns-released/

Excerpt:

This Monday, the Pennsylvania Public School Employees’ Retirement System (PSERS) finally released its long-awaited internal investigation into the pension fund’s misreporting of December 2020 investment return results and allegations that staff accepted gifts that would have been considered conflicts of interest. While the investigation was completed more than two months ago, the publication of the findings had been delayed multiple times.

The report was released after a series of closed-door board meetings that took place that same day. During those meetings, representatives from the law firm Womble Bond Dickinson, which had conducted the investigation, briefed the board on the findings.  

Claire Rauscher, a lawyer from Womble, told the board that, as of now, there was no evidence of criminal conduct, but some important pieces of evidence remain missing. Aon Consulting, a Chicago company that helped PSERS calculate its inaccurate return results, refused to cooperate in the investigation. Because Womble Bond Dickinson is a private law firm, it has no subpoena power to force Aon to comply.

Author(s): Anna Gordon

Publication Date: 2 Feb 2022

Publication Site: ai-CIO

Pennsylvania pension fund says it won’t require board to sign secrecy oaths to hear key report

Mary Pat Campbell

Link:https://www.post-gazette.com/news/state/2022/01/27/psers-pennsylvania-school-pension-fund-ndas-nondisclosure-agreements-board-members-investigation-womble-bond-dickinson/stories/202201270116

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Members of the board of Pennsylvania’s $73 billion school pension fund won’t be required to sign nondisclosure agreements before hearing on Monday the long-awaited findings of an internal investigation into the mammoth plan.

The Public School Employees’ Retirement System is still asking the board to sign the secrecy pacts but is not insisting upon it, the plan’s spokesperson says. Her statement clarified a previous controversial email from the board’s chairman, who asked members to sign NDAs without saying they had the option to refuse.

A law firm is to unveil the results of its investigation at a closed-door session for the PSERS board Monday morning. But the board has yet to decide whether, how soon and how completely those findings will be made public after the meeting.

Author(s): ANGELA COULOUMBIS, JOSEPH N. DISTEFANO AND CRAIG R. MCCOY

Publication Date: 27 Jan 2022

Publication Site: Pittsburgh Post-Gazette

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

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