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Amid PSERS troubles, Pa. lawmakers may be ready for pension reform

Joseph N. DiStefano, The Philadelphia Inquirer on

Published in Business News

In March, The Inquirer reported that the U.S. attorney in Philadelphia and the FBI are investigating PSERS’s Harrisburg land purchases and the agency’s exaggerated profit report. That probe continues, and the pension plan has hired lawyers to defend the agency and advise top staff.

Later that month, Ryan’s audit committee hired another law firm to run its own investigation of the agency’s actions, still in progress.

The PSERS board has already made some changes. It recently agreed to alter its travel policies and no longer allow staff to stay at ritzy hotels where Wall Street financiers host meetings, regardless of the cost. The changes came after an Inquirer article detailed a pattern of costly travel, ranging from $1,178 for one person to stay overnight in New York to $15,627 for a round-trip fare to London.

In June, Ryan joined with other PSERS critics to reject staff recommendations and vote down $1 billion in hedge fund and private real estate investments. Critics say those high-cost investments are a prime cause for the agency’s poor investment performance.

Ryan, however, has not gone as far as other PSERS trustees. He declined to support the six fellow trustees who in June demanded the firing of executive director Glen Grell and chief investment officer James H. Grossman Jr.

In July, 100,000 younger school workers started paying more from their wages to fund the pensions, as required by state law. That change occurred after a corrected report exposed PSERS’s below-target investment performance for 2011 to 2020.

 

No guarantee of reforms

PSERS has taken a pounding in past years without getting much legislative pushback. A state commission in late 2018 unleashed a scathing 420-page report on high costs and low profits at Pennsylvania’s public pension plans, including PSERS, formally the Public School Employees’ Retirement System.

Legislators did pass a couple of comparatively minor measures last fall — a law mandating “stress tests” to warn when investments fall (the plans said they already do this); and another making it easier to compare SERS and PSERS results.

Whether the current effort will have much effect is questionable. The current proposals do not appear to take aim at the agency’s private investments, which critics say are the prime cause for its poor performance.

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