Tag: ai-CIO

PBGC Approves Bailouts for Five More Multiemployer Plans in May

Mary Pat Campbell

Link: https://www.ai-cio.com/news/pbgc-approves-bailouts-for-five-more-multiemployer-plans-in-may/

Excerpt:

The Pension Benefit Guaranty Corporation has approved applications submitted to the Special Financial Assistance Program by five more struggling multiemployer plans in May alone. The PBGC has now approved more than $6.2 billion in bailout funds to plans covering close to 120,000 workers and retirees.

The PBGC said it will provide $210.4 million in SFA funding to the Local 365 UAW Pension Fund Pension Plan of Englewood Cliffs, New Jersey, which covers 3,736 participants in the manufacturing industry.

The Local 365 UAW Plan became insolvent in December 2020, at which time the PBGC began providing the plan with financial assistance. As required by law, the plan reduced participants’ benefits to the PBGC guarantee levels, which were approximately 20% below the benefits payable under the terms of the plan.

Author(s): Michael Katz

Publication Date: 23 May 2022

Publication Site: ai-CIO

CalSTRS Plans to Redefine ‘Diverse Managers’ and ‘Emerging Managers,’ in Accordance With New California Law

Mary Pat Campbell

Link: https://www.ai-cio.com/news/calstrs-plans-to-redefine-diverse-managers-and-emerging-managers-in-accordance-with-new-california-law/

Excerpt:

The California State Teachers’ Retirement System is now planning to formally define the term “diverse manager” and adjust their definition of “emerging manager.” Though the two categories overlap, they are not identical.

The term “emerging manager” is based on the following criteria, according to CalSTRS: “the amount of assets under management; fund lifecycle of funds; firm legal structure; non-employee ownership percentage; and other various factors including track record, private placement memorandum.”

The term “diverse manager” will refer exclusively to the diversity of the firm’s ownership. The term will be defined in a tiered way such that if a firm is 25% to 49% owned by women, ethnic minorities, and/or LGBTQ individuals, it will be labeled as “substantially diverse.” A firm would be labeled as “majority diverse” if it is more than 50% owned by women, ethnic minorities, and/or LGBTQ people. Ethnic minorities include all non-white groups listed on the census.

Author(s): Anna Gordon

Publication Date: 4 May 2022

Publication Site: ai-CIO

How Much Private Equity Is Too Much for a Public Pension?

Mary Pat Campbell

Link: https://www.ai-cio.com/in-focus/shop-talk/how-much-private-equity-is-too-much-for-a-public-pension/

Excerpt:

Pension funds around the U.S. are upping their allocations to private equity after a year of record-breaking returns. According to data obtained from Preqin, the average public pension’s allotment to private equity increased to 8.9% in 2021. In contrast, the average allocation was just 6.5% in 2012.

New York City’s pensions are among those that may see an increased allocation to the asset class in their portfolios should a new law pass. Currently, New York State implements a “basket clause,” which prevents public pensions from investing above 25% of their total portfolios in investments considered higher risk, including real estate, infrastructure, hedge funds, international equities, and private equity. The proposed law would increase that allocation to 35% for all pension funds in the state. If the law passed, the boards of New York City’s five public pensions would vote on whether to increase the “basket” for their own pension funds.

New York City Interim CIO Michael Haddad, who is responsible for overseeing investments in the five pension plans across the city, says that while the change in the law isn’t targeted at private equity exclusively, it’s likely that the asset class would increase.

Author(s): Anna Gordon

Publication Date: 10 May 2022

Publication Site: ai-CIO

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

Warning: Tossing Russian Banks From the International System Could Backfire

Mary Pat Campbell

Link: https://www.ai-cio.com/news/warning-tossing-russian-banks-from-the-international-system-could-backfire/

Excerpt:

The decision to boot Russian lenders from the global bank messaging system as punishment for its invasion of Ukraine is a very bad idea that could boomerang and hurt the West, Credit Suisse admonishes.

“Exclusions from SWIFT will lead to missed payments and giant overdrafts similar to the missed payments and giant overdrafts that we saw in March 2020,” wrote Credit Suisse strategist Zoltan Pozsar, in a research note.

….

“Exclusions from SWIFT will lead to missed payments everywhere,” Pozsar wrote. Two years ago, “the virus froze the flow of goods and services that led to missed payments.” Aside from the financial panic at the outset of the pandemic, the world ran into a similar problem in 2008, when Lehman Brothers collapsed, he said. 

 Pozsar wrote: “Banks’ inability to make payments due to their exclusion from SWIFT is the same as Lehman’s inability to make payments due to its clearing bank’s unwillingness to send payments on its behalf. History does not repeat itself, but it rhymes.”

Author(s): Larry Light

Publication Date: 28 Feb 2022

Publication Site: ai-CIO

High Inflation Leads to Expensive Cost-of-Living Adjustments for CalPERS and Others

Mary Pat Campbell

Link: https://www.ai-cio.com/news/high-inflation-leads-to-expensive-cost-of-living-adjustments-for-calpers-and-others/

Excerpt:

With big returns come big expenses. That’s what seems to be the case for pensions across the country, as they are forced to increase their payouts to beneficiaries due to inflation. While the past year has been a record breaker for pension fund returns, inflation will be claiming its fair share of the gains as well.

For CalPERS members, those who retired between 2006 and 2014 will receive the biggest increase at 4.7%. This will be the largest cost-of-living increase for beneficiaries in the past 32 years, dating to 1990.

While the Bureau of Labor Statistics has estimated the Consumer Price Index to have increased by 7% over  2021, CalPERS is not using the 7% to calculate its increased payments. Instead, it uses an average of each month’s numbers.

CalSTRS similarly also has built in inflation protection, thanks to a California law that requires public pensions to do so. However, CalSTRS’ method of calculating this payment is slightly different. The fund gives quarterly supplement payments to those whose annual benefit falls below 85% of their original benefit. This year’s inflation numbers will likely increase the number of supplemental payments that CalSTRS in forced to provide.

Author(s): Anna Gordon

Publication Date: 1 Mar 2022

Publication Site: ai-CIO

Teamsters Pension Applies for Bailout After $58 Million Legal Appeal Dismissed

Mary Pat Campbell

Link: https://www.ai-cio.com/news/teamsters-pension-applies-for-bailout-after-58-million-legal-appeal-dismissed/

Excerpt:

A Teamsters pension fund has applied to the Pension Benefit Guaranty Corporation for a bailout after a circuit court denied its appeal in a lawsuit seeking $58 million in withdrawal liabilities from C&S Wholesale Grocers Inc.

The New York State Teamsters Conference Pension and Retirement Fund, a multiemployer plan based in Syracuse, New York, has applied to PBGC for special financial assistance under the American Rescue Plan Act to improve its financial health and restore benefits previously suspended under the Multiemployer Pension Reform Act. The pension fund said the restoration of suspended benefits would be retroactive and prospective, which means participants would be repaid for benefits reduced previously, while also having benefits restored to pre-suspension levels.

Author(s): Michael Katz

Publication Date: 14 Feb 2022

Publication Site: ai-CIO

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

AstraZeneca to End Its US Corporate Pension Plan

Mary Pat Campbell

Link:https://www.ai-cio.com/news/astrazeneca-to-end-its-us-corporate-pension-plan/

Excerpt:

AstraZeneca, a British–Swedish biopharmaceutical company responsible for developing one of the world’s most widely distributed COVID-19 vaccines, announced on January 25 that it will be transferring its pension assets to an insurance company.

“This is a common practice, achieved via a process known as ‘plan termination’ and ‘buy-out.’ This action does not impact any participant’s eligibility to receive the benefit earned under the pension plan,” AstraZeneca representatives wrote in a statement explaining the transition.

AstraZeneca’s US pension initially began struggling with its funded status in 2017, and the company made the decision to freeze benefit accruals that year. This move ended up making a significant difference, bringing funded status from 80% in 2017 up to 99.19% by the end of 2018. The plan currently has $1.3 billion in assets under management (AUM) and serves approximately 7,000 employees, according to its Form 5500.

Author(s): Anna Gordon

Publication Date: 7 Feb 2022

Publication Site: ai-CIO

PBGC Approves $100.5 Million Bailout of New Jersey Pension Plan

Mary Pat Campbell

Link:https://www.ai-cio.com/news/pbgc-approves-100-5-million-bailout-of-new-jersey-pension-plan/

Excerpt:

The Pension Benefit Guaranty Corporation (PBGC) has approved a $100.5 million bail out of the Local 408 International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America Pension Plan. It is the fifth plan approved by the PBGC under the Special Financial Assistance (SFA) program, which was enacted under the American Rescue Plan Act of 2021 (ARP).

The Union, New Jersey-based plan, which covers over 1,000 participants in the transportation industry, was certified to be in critical and declining status in the plan year that began in 2020 and became insolvent last September. The plan was required by law to reduce its participants’ benefits to the PBGC guarantee level, which was approximately 60% below the benefits payable under the terms of the pension.

….

Struggling pension plans are required under the SFA program to demonstrate eligibility and to calculate the amount of assistance per ARP and PBGC guidelines. Funds provided under the program may be used only to pay plan benefits and administrative expenses, and plans receiving aid are also subject to certain terms, conditions, and reporting requirements.

Author(s): Michael Katz

Publication Date: 28 Jan 2022

Publication Site: ai-CIO

Looks Like Politicians Will Extend Illinois’ Pension Buyout Program

Mary Pat Campbell

Link:https://www.ai-cio.com/news/looks-like-politicians-will-extend-illinois-pension-buyout-program/

Excerpt:

In 2019, the state of Illinois introduced a pension buyout system that allowed pension plan holders to receive a lump sum of cash now as opposed to keeping their money invested in the pension system. The payments are funded by a state bond issue of $1 billion.

Now, however, politicians are concerned the funding for this program will run out of money. Illinois state Representative Bob Morgan introduced a fast-tracked bill that is currently pending in the state House to renew this program for another two years and authorize another $1 billion in funding.

With over $130 billion in unfunded liabilities statewide, the state of Illinois has been actively searching for ways to help alleviate its financial burdens.

Author(s): Anna Gordon

Publication Date: 28 Jan 2022

Publication Site: ai-CIO

CalPERS Considering Selling Up to $6 Billion in Private Equity Stakes

Mary Pat Campbell

Link: https://www.ai-cio.com/news/calpers-considering-selling-up-to-6-billion-in-private-equity-stakes/

Excerpt:

The California Public Employees’ Retirement System (CalPERS) has engaged financial services company Jefferies about the potential of selling up to $6 billion of its private equity stakes, according Buyouts magazine. This comes just after CalPERS announced it would be increasing the percentage of its portfolio allotted to private equity to 13% from 8% in November.  

CalPERS board member Margaret Brown told Secondaries Investor in November that the fund is considering investing in secondaries and divesting from some of its legacy private equity investments.

“We have some really old private equity that’s just sitting there and doing nothing,” she said.

Author(s): Anna Gordon

Publication Date: 13 Jan 2022

Publication Site: ai-CIO