NC system flexes shareholder muscle on executive pay

Five members of the Exxon board of directors are losing the support of a major institutional investor.

The North Carolina retirement system, which is managed by the state treasurer's office, is taking this action to make known its displeasure regarding Exxon's executive pay practices.

Grabbing on to an issue popular among voters, [State Treasurer Richard Moore] said the North Carolina retirement system will refuse to support the re-election of the directors who have served on the board's compensation committee. The system owns 11 million shares of Exxon Mobil stock valued at $663-million (U.S.). The company's annual meeting is today in Dallas.

Congress and the public have complained about a nearly $400-million retirement package given recently to the energy giant's former chairman, Lee Raymond.

"As shareholders, we are outraged that executives are using soaring gas prices, which are hitting consumers at the pump, to fatten their own wallets," Mr. Moore said. "The excessive pay packages, like that seen at Exxon Mobil, diminish shareholder value and are evidence of policies that fail to generate long-term value for shareholders."

Exxon Mobil didn't immediately return a phone call yesterday seeking comment.

Exxon shares represent the North Carolina retirement system's largest single block of holdings.

KU students FIGHT for pension fund divestiture

A group of students at Kansas University is asking a municipal pension fund to consider the moral implications of some of its investments.

The group has adopted the name FIGHT, which stands for "Fighting Ignorance of Global Humanitarian Threats." FIGHT wants the city of Wichita's public pension system to divest itself of holdings in companies that do business in Sudan. This is in response to the genocide in Darfur.

"This is an issue that I and several of my friends have been working day in and day out on here at the University of Kansas," said Amanda Applegate, a member of FIGHT (Fighting Ignorance of Global Humanitarian Threats). "Our foremost concern at the moment is attempting to divest finances from wherever possible, because we believe that divestment is the fastest way to end the genocide in Sudan."

Applegate, a graduate of Wichita East and FIGHT's advocacy director, said the group is awaiting a report from the city. It has also asked the same questions of the city of Lawrence.

Wichita officials confirmed that they were looking into the matter.

FIGHT's request is the latest example of how the campaign to help Darfur has slowly gained traction in Kansas.

In February, Sen. Donald Betts, D-Wichita, introduced a resolution asking the Kansas Public Employees Retirement System to divest from companies doing business in Sudan. The resolution was tabled because it involved a change in how money was being invested.

Memorial Day Open Thread

Our pension benefits might be under assault from some quarters, and the state worker paychecks could certainly be bigger, but isn't it great to have the day off as we honor those who have made the ultimate sacrifice for their country?

So, what's going on in your neck of the woods?

Use the "Comments" feature to give your thoughts on the state of the pension environment, or anything else you feel like talking about.

Feds hope to develop "electronic retirement system"

The Washington Post's "Federal Diary" blog reports on efforts to develop an electronic retirement system for the federal government.

The Office of Personnel Management has awarded a contract to the firm Accenture to develop a system that will allow speedier calculations of retirement benefits for federal employees.

The current process requires a search to find personnel files and other paperwork, often creating delays. Most retirees, as a result, are put on interim, partial retirement pay while a final annuity is calculated.

Accenture, a consulting and technology services company, will help OPM reorganize its staffing, training and processes for handling retirement claims under a contract that carries a maximum value of $40 million and that will run no longer than four years, an OPM official said. Accenture will be paid as task orders are issued, the official said.

The contract is the second awarded by OPM to upgrade retirement claims processing. On May 3, the agency announced a 10-year, $290 million contract with Hewitt Associates, an outsourcing and consulting firm, to build the new, electronic benefits-delivery and tracking system.

Funding for the retirement project, however, may be in jeopardy. The House Appropriations transportation-treasury subcommittee that oversees OPM has removed funding for the project in fiscal 2007. The administration had asked for $26.7 million next year.

KRS land purchase scrutinized

State auditors want to know the details of a Kentucky Retirement Systems land deal. The system reportedly paid $700 thousand dollars for a piece of property that had sold for $450 thousand just two months prior.

The property had been on the market since 2000, and the retirement system had many opportunities to buy it before it was sold to veterinarian Caroline G. Taylor, said a trustee of the Holly Hill Church of Christ.

Since the deal, two high-ranking retirement system officials have since resigned. Gordon Mullis Jr., the chief operating officer, who signed the deed of sale for the property, resigned April 10. John R. Krimmel, chief investment officer, resigned May 10. Both men did not return repeated calls for comment.

A woman at Krimmel's Frankfort home said he was traveling and "pursuing other options" and would probably not comment about his departure.

Williams Hanes, executive director of the retirement system, said the purchase is being reviewed by the system's board of trustees and its lawyer. Information has also been forwarded to State Auditor Crit Luallen, the Kentucky State Police and Attorney General Greg Stumbo.

Options back-dating probe heats up

Public pension funds are leading the attack on the corporate practice of back-dating stock options.

Several state retirement systems are involved in lawsuits against companies who have granted to their employees stock options which in some cases are priced lower than the current market value.

Calpers, the largest U.S. pension fund, plans to ask companies named in the inquiry to disclose additional details about their option-granting practices. The move comes as pension funds in Ohio and Minnesota are suing UnitedHealth Group over the pay package of its chief executive. UnitedHealth, the second-largest U.S. health insurer after WellPoint, has set up a special committee to review its stock-option grants.

At least 24 companies have said federal officials are investigating their stock-option practices, including the possibility that they deliberately moved option grants back to dates when the stock price was lower. Backdating would inflate the value of the options and shorten the amount of time executives would have to wait before claiming a profit.

"Executive pay has been one of the top issues for our members for the past few years, and this just adds fuel to the fire," said Ann Yerger, executive director of the Council of Institutional Investors in Washington. "It's a corporate atrocity that everyone is shocked by."

Public Pension News reported previously on the UnitedHealth lawsuit here.

Editorial: Reform N.J. pension laws

The Asbury Park Press editorializes against double- and even triple-dipping in New Jersey's public pension system:

It's little wonder there's been no legislative action to end the practice of pension tacking — earning pension credits from multiple part-time public jobs to create a much larger pension upon retirement. About a third of New Jersey's legislators have more than one state-funded pension, so they have little incentive to act.

One Assembly member, Christopher "Kip" Bateman, R-Somerset, wants to change that. Not only has he introduced bills to address tacking, but he is giving up his pension rights from three municipal jobs. Legislators from both sides of the political aisle should join him in his bid to end a practice that is a drain on the pension system and contributes to rising property taxes in New Jersey.

It's a big budget number. A Gannett New Jersey review last year of pension data from 2002 showed that $238 million — 3 percent of the entire payroll of local, county and state government, excluding police, firefighters and teachers — was paid in salaries to 9,500 people holding 24,700 government jobs.

Bateman's first bill (A-696) would require legislators with more than one job in the Public Employees' Retirement System to choose only one position to earn pension credit. That's what he's doing in giving up his credits for serving as municipal prosecutor in three Somerset County towns. The other bill (A-119) would apply to anyone in the state retirement system hired after the bill becomes law.

Both bills face a rocky future because they hit two entrenched groups — legislators and public employees — in their pocketbook. But the price is paid by all taxpayers who fund pensions for retirees for years to come.

Special benefits hurting Mass. pension system

Insiders who specialize in gaming the Massachusetts public pension system have contributed to a $3 billion increase in liabilities. A new study says the system is plagued with what it calls "abuses, loopholes, and exceptions."

One of the most brazen pension ploys, [Ken Ardon, a Salem State economist and a former Romney adminstration finance official] found, is the rash of state workers who inexplicably wind up “fired” right after they reach the 20-year mark.

The dismissals are a bold attempt to grab one of the state retirement system’s coveted perks - early retirement. A state law allows workers with 20 years of service who have either been fired, or had their jobs eliminated, to sail off with a pension.

That’s just one of a veritable thicket of loopholes Beacon Hill lawmakers have inserted over the years, the study finds.

The study also cites the example of a former University of Massachusetts president who attempted to augment his pension by arguing that his housing and transportation allowances, in addition to his retirement annuity, should have been part of his benefit calculation.

Louisiana lawmakers reject UAL payments

The Louisiana legislature has rejected a measure which would beging paying down the unfunded accrued liabilities of that state's public employee and teacher retirement systems.

A bill that would lock the state into paying off more of its retirement debt each year was narrowly rejected by the Senate Finance Committee.

The Louisiana State Employees' Retirement System and the Teachers' Retirement System of Louisiana are (b) billions of dollars short of what they will owe employees when they retire, a debt that falls on the state to pay over time and grows the longer it takes to pay.

Senator Walter Boasso proposed the state put more money toward that debt in a bill that would cost the state 111 (m) million dollars in the upcoming fiscal year that begins July first.

Boasso says there's never going to be a right time to start paying down the debt.

Opponents of traditional public pensions like to blame system members for the drain on state and local budgets. The real culprits are lawmakers who refuse to make responsible decisions about keeping their promises to generations of hard-working public employees.

New York comptroller defends public pensions

This is from nysut.org:

At a time when pension systems — especially public pensions with defined benefits — are under assault by conservatives who view government as the enemy, it is the obligation of unions and progressives to stand up and be counted, state Comptroller Alan Hevesi told delegates to the RA.

He said federal legislation has already undermined private pensions to the point where 10 million retirees of large corporations have lost their benefits.

President Bush's campaign to privatize Social Security was also part of what Hevesi called the "ideological assault" on pensions.

Influential conservatives like Grover Norquist maintain that defined-benefit pensions, like those for public employees, including the NYS Teachers' Retirement System, are "overgenerous."

"It's a myth," Hevesi said. He pointed out that 70 percent of those receiving pensions from the state Employees' Retirement System get less than $20,000 per year, with some considerably less. Most retirees who receive more were members of the uniformed services.

International Public Pension Reform

As Great Britain undertakes a reform of its national public pension system, the International Herald Tribune examines what other countries are doing in that vein:

BELGIUM

After a number of strikes and tension with unions, the government increased the eligible age for early retirement to 60 from 58 and the years of contribution for full retirement benefits to 40 from 38 years.

FRANCE

A 2003 law obliges people to work longer for a full pension, with a phase-in from 2004 to 2008. Public sector workers must contribute for 40 years like private sector employees, instead of 37½ years. The contributions period required for a full pension will increase to 41 years by 2012 and 42 after 2012.

GERMANY

Germany agreed this year to raise the basic retirement age to 67 in steps from 2012 to 2029. Pensioners get no increase in benefits through 2009. In March, the government advised people to take extra coverage as pressure on basic pensions grows.

GREECE

Greece's center-right government has not tackled reforms of the country's social security system other than to stress the urgency for dialogue between social partners to prepare for an overhaul that will secure the system's viability.

IRELAND

A relatively young, fast- growing population means Ireland's problem is less acute, but almost half the members of its work force do not have pensions and the system is under review. In 2000 the government decided to set aside 1 percent of gross domestic product a year and the proceeds from the privatization of the telecommunications operator, Eircom, to help finance future state pensions.

ITALY

The new center-left coalition said during the campaign that it would scrap a 2004 law raise the retirement age to 60 or after 40 contribution years starting in 2008, in order to avoid the sharp jump in the retirement age. Instead it would closely monitor demographic trends and raise the retirement age if and when necessary.

PORTUGAL

The Socialist government raised the retirement age for public workers last year to 65 from 60 as part of convergence of public and private pensions. Portugal is evaluating options to reduce costs for private sector workers. Pensioners will also pay higher taxes under the 2006 budget.

CZECH REPUBLIC

The country needs to reform its pensions from the pay-as-you-go system. Parliament proposed raising the retirement age by a few months every year to reach 63 by 2013, and put the retirement for men born in or after 1953 and childless women born in or after 1956 at 63. Political parties seeking to raise the retirement age to 65 in 20 years.

JAPAN

With one of the largest retiring populations among industrialized nations, Japan is facing serious economic and social problems. The country has public and private pension plans, based on a pay-as-you-go system that relies on the contributions of employers and employees to pay pensions.

POLAND

The country changed its pension system in 1999, replacing a pay-as-you-go system with a "three pillar" approach including mandatory individual savings accounts. The move has been praised for averting a crisis, but caused a hiccup in the process of EU membership before EU agreed to allow Poland phase the transition costs into its accounts over five years.

SWEDEN

A severe budget crisis in the early 1990s prompted Sweden to overhaul its pension plan. The new system, introduced in 1999, places greater emphasis on balancing payments made into the system against expenditures as well as taking into account the economic growth rate. Individuals may invest a portion of pension payments in private pension funds of their choice.

UNITED STATES

Social Security is a social insurance program that also pays disability benefits, financed through payroll taxes and payable at a reduced level starting at age 62.

The program - also in danger of severe underfinancing - exists alongside private pensions set up by companies. President George W. Bush has called for a transition to partial privatization via individual accounts that could be invested in the stock market.

PA governor praises PERS

Governor Ed Rendell congratulated the Pennsylvania Public Employees' Retirement System for successful litigation that netted $23 million. The victory was in a lawsuit against Time Warner, Inc., AOL, Ernst & Young and other parties.

"Since taking office, I have encouraged the state's managed funds, which make large investments, to pursue recovery of substantial losses that they believe and allege to have resulted from unlawful conduct by public companies, including the issuance of alleged false financial statements," said Governor Rendell.

"By successfully pursuing this litigation, and successfully reaching settlement, these public fund managers have helped to reduce future financial burdens on taxpayers. I will continue to work with my General Counsel to pursue recovery in these kinds of cases."

The funds endured losses from these investments prior to Governor Rendell taking office, but no litigation was pursued. By going to court, at the Governor's urging, these funds were able to collect money for state and public school retirees and help to foster and implement better corporate governance to benefit all investors.

CalPERS considers health benefit cuts

UPI reports the California Public Employees' Retirement System is mulling over a reduction in health benefits which would include restrictions on HMO membership in rural areas of the state.

CalPERS` healthcare purchasing pool also could give members a lower-cost coverage option by adding a third preferred provider organization plan, the Sacramento (Calif.) Business Journal reported Monday.

'The reality is healthcare costs continue to increase and CalPERS members continue to age,' said CalPERS` Terri Westbrook, assistant executive officer of the health benefits branch. 'If we continue with the status quo, our costs will increase.'

Public pension systems file suit on back-dating of stock options

Spurred by the compensation packages for executives of UnitedHealth Group, Inc., five public retirement systems have initiated a lawsuit related to the issuance of stock options.

The systems want to stop Chief Executive Officer William McGuire and Chief Operating Officer Stephen J. Hemsley from exercising back-dated stock options until the suit is resolved.

The lawsuit alleges that McGuire, Hemsley, and several other UnitedHealth executives received several billion dollars worth of illegal stock option grants that were backdated to coincide with dates on which the stock prices were particularly low. For example, between 1997 and 2002, McGuire and Hemsley purportedly received stock options at, or pennies from, UnitedHealth's annual stock-price low six years in a row. The lawsuit challenges the validity of these stock options on the ground that they were not issued in accordance with the executive compensation plans and employment agreements agreed to by the Company and voted on by shareholders. By backdating the grants to earlier dates with lower stock prices, UnitedHealth executives received windfall profits at the direct expense of UnitedHealth.

The retirement systems involved in the lawsuit are:

• St. Paul Teachers' Retirement Fund


• Public Employees' Retirement System of Mississippi


• Jacksonville Police & Fire Pension Fund


• Louisiana Municipal Police Employees' Retirement System


• Louisiana Sheriffs' Pension & Relief Fund

Retired firefighters lose '13th check'

Pension trustees in Bay City, Michigan have withdrawn an annual bonus paid to the city's retired firefighters. The action is part of a plan to close a multi-million-dollar budget hole.

More than a half dozen former officers and firefighters questioned the Police and Fire Retirement System Board of Trustees on Tuesday about the $2.2 million it has reserved for annual bonus paychecks - known as the 13th check - on top of the monthly payments to retirees.

Board members absorbed the fund into the general account to fund regular pension stipends. This May, instead of an extra check, beneficiaries received a letter detailing the suspension of the seven-year-old 13th check program.

DB plans in good shape

The nation's Defined Benefit public pension plans face funding challenges, but are not in a crisis. This is the conclusion of a study published by NASRA official Keith Brainard.

With some exceptions... public pensions remain in reasonably good condition, thanks to diversified and professionally managed portfolios, an improving stock market, and a near cessation of benefit enhancements during the past few years. Assuming investment markets continue their return to historic norms, the current public pension funding level is projected to mark the low point and will begin to rise.

***Seventy percent of public pension plans are funded at 80 percent or higher, a threshold considered by many actuaries to indicate actuarial health. Of course, that leaves 30 percent funded at lower levels, with a higher unfunded liability to overcome.

Most plans with poor funding levels got that way through the chronic failure of legislatures (or city councils) to make required contributions.

Nationwide, taxpayer contributions make up one-fourth of all public pension revenue; investment earnings and worker contributions make up the rest. Generating investment earnings first requires contributions, and states and cities that failed to make required contributions have lost out on billions of dollars of potential earnings, thereby worsening their pension plan's funding level.

Fort Worth mayor wants more directors for pension plan

The mayor of Fort Worth wants more expert advisors for his city's $1.6 billion public pension fund.

As the city continues an exhaustive financial review of its billion-dollar pension fund, Mayor Mike Moncrief is pushing for an immediate expansion of the fund's board of directors to increase its level of expertise.

"The sooner we get some expertise, some additional expertise, on this board, the better off I'm going to feel," Moncrief said during a council session Tuesday.

A team of financial experts -- the city's external and internal auditors, an independent actuarial firm and a professional with a background in securities regulation -- is testing the financial condition of the city's $1.6 billion pension fund.

The team is being formed by the city auditor at the request of the City Council, which has made Fort Worth's pension fund a top concern for 2006. A report to the council is expected by mid-July.

"It's being driven by this council's resolve to make sure we're doing everything possible to account for the people's money," Councilman Jungus Jordan said. "That's probably the No. 1 job that this council has."

Voters in Texas say "no" to firefighter pension

From the Bay City Tribune:

A firefighter pension plan was defeated by a 6-to-1 margin, as Bay City voters rejected it and two other proposed charter amendments Saturday.

Vote totals were 185 for and 1,212 against Proposition 1, directing city officials to join the Texas Statewide Emergency Service Retirement System by Oct. 1, to provide a pension and disability plan for volunteer firefighters.

Pension contributions increase for Ohio library workers

Library staffers in Stark County, Ohio will pay more for state retirement benefits, even as they get a 4 percent raise this year.

Effective in June through March 21, 2009, library wages now will be in line with those at similar-sized Ohio libraries, although the average entry-level wage will remain lower, according to a library news release.

Required contributions to the Ohio Public Employees Retirement System fund have increased from 8.5 percent to 9 percent.

For the first time, employees will also pay 5 percent to 7.5 percent, depending on whether they are single or have family coverage, toward health care insurance premiums.

The library will continue to provide benefits for part-time employees on a prorated basis.