Friday, July 28, 2017
Pennsylvania School Employees' Retirement System

Information about the Push for Pension Change

Check out this YOUTUBE video for how the "pension crisis" developed and what you can do about it:

http://www.youtube.com/watch?v=JWXnKvPL5-w

You will find it to be infomrative and to you best interests to stay up to date with information.

 

A message from Jim Sando, member of the PSERS Board of Directors and President of MER:

 

As one of the five members of he PSERS (Public School Employees Retirement System) board representing active/retired members, I am happy to report that our fund is doing well.  PSERS is the thirteenth largest system in the US.   As such it has a great deal of market clout and knows how to use it.  Since the market downturn in 1999-2000, the fund has grown from an asset base of 53.2 Billion dollars to 67.2 in the 2007 fiscal year.  With a 2007 funding ratio of 85.8%, PSERS ranks among the best in the field.

 

With over 264,000 active and over 168,000 retired members (109,000 vested/inactive as well), PSERS serves a large part of Pennsylvania’s citizens, pouring billions into the state’s economy each year. 

 

The fund, manages by both staff and outside investment professionals has managed to beat the actuarial assumed rate of 8.5% over the past ten years, even when the market downturn in the late 90’s and early 2000 are taken in to account. With a 1-year return of 13.82 % and a ten-year average of 9.48%, PSERS consistently ranks as the top performer in the industry.

 

That’s all well and good, but I know what you’re really thinking about.   What about a COLA?  As hard as it may be to believe, PSERS does not have the statutory power to grant COLA’s.  That power rests with the legislature.  There is a current bill, supported by ALL of the states retiree groups, that seems to have some strength.  It is a graduated formula, with the greatest percentage (25%) going to those who retired prior to 1990, and decreasing as for those who retired more recently.  As always, it doesn’t hurt to let you legislator (both the state house and senate) know where you stand.   Call them and ask them to sign o n to the bill and to ask their leadership to MOVE the bill.

 

I’d like you to know that the members of the PSERS Board of Trustees work with the staff to ensure the fund continues to maintain its leadership position.  We take very seriously our responsibility to prudently invest your retirement dollars.

 

 

 

The Pennsylvania Public School Employees' Retirement System (PSERS) announced strong investment return results for the quarter and one-year period ended September 30, 2007.

The pension fund generated returns of 3.73 percent for the quarter and 22.58 percent for the one-year period ended September 30, 2007. The quarter and one-year period investment returns place PSERS in the top 10 percent of the public pension plan database compiled by Wilshire Associates.

PSERS' investment returns of 18.04 percent for the three-year period and 17.88 percent for the 5-year period ended September 30, 2007 ranked in the top 1 percent of the Wilshire Associates' public pension plan database.

PSERS' Chairman Melva Vogler commended the Fund's recent investment performance stating: "I am pleased to report PSERS' positive third quarter investment performance. PSERS Board and Investment Staff have worked hard to develop a diversified, long-term investment policy, which has proven valuable during the recent market volatility. PSERS continues to produce top decile returns and remains one of the top performing public pension funds in the country."

A message about PSERS and incentives for staff:

PSERS Investment Incentive Policy for FY 2007/2008

BACKGROUND ON INCENTIVE POLICY

PSERS incentive plan for its investment staff was approved unanimously by PSERS Board

• The incentives are outlined in a policy that is reviewed on an annual basis. The incentives being paid are based on a policy that was approved on August 3, 2007 for the fiscal year ending June 30, 2008.

• The incentives were earned during the past fiscal year which ended on June 30, 2008 and are paid later that year in the late Fall/early Winter timeframe.

• Twenty-one investment professionals received an incentive for the fiscal year ended June 30, 2008. None of the investment professionals received the maximum amount of incentive that could be earned.

o The total amount of incentives to be paid = $854,113.

o The average incentive paid was $40,672.

• The incentive plan is part of the overall compensation program for the investment office staff. PSERS goal is to provide incentive for PSERS investment staff to earn the best returns possible for the fund. Rather than paying more in base pay, PSERS policy makes the investment staff earn a portion of their pay through the incentive policy. The better the Fund performs versus policy and the median public pension fund, the better the Investment Office staff does. The interest of the Fund and the staff are aligned.

PSERS IS LEGALLY OBLIGATED TO PAY THE INCENTIVES FOR THE PAST FISCAL YEAR

PSERS received a legal opinion from PSERS Office of Chief Counsel. The opinion determined that the fund is legally and contractually obligated to pay the incentives earned for the past fiscal year.

PSERS SAVES COMMONWEALTH TAXPAYERS MILLIONS OF DOLLARS BY HAVING ITS INVESTMENT STAFF MANAGE NEARLY 30% OF THE FUND’S ASSETS IN-HOUSE

While PSERS incentive program paid out $854,113 for FY 2007/2008 to its investment staff, PSERS saved approximately $12 million by utilizing in-house portfolio managers and equity traders. Those investment staff also outperformed their benchmarks and added $19 million in additional investment income to the fund. Therefore, PSERS saved the Commonwealth taxpayers a total of $31 million versus its incentive plan payment of $854,113 to the investment staff.

o By managing nearly 30% of its investment internally, PSERS saved approximately $4 million for FY 2007/2008 vs. the estimated cost of outsourcing this function to external managers.

o By operating its own in-house trading room, PSERS saved approximately $8 million for FY 2007/2008 vs. the median trade execution as measured by PLEXUS, a third party trade evaluator.

o PSERS investment staff outperformed their benchmarks by $19 million for FY 2007/2008.

• Over the following timeframes, PSERS investment staff added the following value vs. the median public pension plan (according to Wilshire):

o 1-year: $1.3 billion

o 3-years: $9.3 billion

o 5-years: $14.8 billion

By producing these returns above the median public pension plan, PSERS has created significant savings for the Pennsylvania school employers and Commonwealth taxpayers who would otherwise be liable for these amounts through higher employer contribution rates.

PSERS PAYS SIGNIFICANTLY LESS IN MANAGEMENT FEES BECAUSE OF ITS INTERNAL INVESTMENT STAFF

• If PSERS were to eliminate its investment staff, PSERS’ school employers and Commonwealth taxpayers would have to pay significantly larger fees to external managers to similarly invest the funds.

THE LEVELS OF COMPENSATION FOR PSERS INVESTMENT STAFF ARE SIGNIFICANTLY LOWER WHEN COMPARED TO OTHER PUBLIC AND PRIVATE SECTOR PENSION PLANS.

A recent study by an independent consultant reported PSERS’ investment staff is underpaid on average when compared with other public funds. If PSERS’ investment staff leave to pursue higher paying jobs, it will become increasingly difficult to hire qualified individuals to replace them at the current pay levels.

o PSERS hired an independent consultant to conduct a classification and compensation study in late 2006

o According to the study issued by McLagan Partners, PSERS’ investment staff pay levels in FY 05/06 were 10% below the median of the large public fund select group and 65% below the median for private sector firms.

o While adjustments were made from recommendations made by McLagan, the overall compensation levels were not adjusted to levels recommended by McLagan and were phased in over two years. Therefore, after the adjustments, the Investment Office staff overall compensation in 2008 remains below the median 2006 large public fund select group.

DUE TO THE CURRENT ECONOMIC CONDITIONS, THE INCENTIVE COMPENSATION PLAN POLICY FOR FY 2008/2009 WILL BE TERMINATED AS OF DECEMBER 31, 2008

Upon the recommendation of the Personnel Committee, the Board voted on December 12, 2008 to terminate the incentive compensation plan policy as of December 31, 2008. The legally obligated incentive payments for the past fiscal year will be paid through bi-weekly pay adjustments, instead of lump sum payouts, through the remainder of the current fiscal year.

ADDITIONAL FACTS ABOUT PSERS

The pension fund’s return on investments was -2.82% percent for the fiscal-year period ending June 30, 2008.

• While PSERS had a negative return for the fiscal year, the fund still outperformed many of its peers. PSERS fiscal year return was –2.82 percent and that return is above the median return of -4.56 percent, which places the fund in the top third of public pension funds in Wilshire’s database.

• PSERS had four outstanding fiscal years of investment returns prior to the FY 2007/2008 (FY 2003/2004 19.67 percent, FY 2004/2005 12.87 percent, FY 2005/2006 15.26 percent, and FY 2006/2007 22.93 percent).

• For the three-year and five-year periods ended June 30, 2008, PSERS returned 11.25 percent and 13.21 percent, respectively.

• PSERS is the 14th largest defined benefit pension fund in the nation.

• As of September 30, 2008, PSERS had an investment portfolio of approximately $54.7 billion and a membership of more than 264,000 active school employees and 168,000 retirees.

• For information visit PSERS’ website at www.psers.state.pa.us.