Pension funds: why the County is silent on ROI and fees?
A Pension Fund is an investment. ANY investment is about two things:
• Return on investment (stocks, bonds, money market, etc.)
• Management fee.
The County is SILENT on both expense and investment returns, and wants everyone to believe that a free lunch is possible on Wall Street: you get two more benefits for free.
The Pension Board “felt it was in the County’s best interest,” “estimated that this move will save the County approximately $175,275.00 per year,” and believes that “this move will … immediately increase the investment returns” (see Note 1). They neither researched alternatives with their existing manager nor sought out other investment proposals.
This change makes neither a substantive change to prospective returns they could not have found through other means nor addresses the fact that their savings may actually leave future taxpayers having to pay for benefits that are not being funded today.
The County expects you to feel, assume and hope with them instead of providing a cost benefits analysis and a reasonable explanation for the transfer (see Note 2).
The Pension and Commissioners Board both authorized to bid this contract out, but changed their mind for unknown reasons (see Note 2). It is another example of flip flopping. The pattern of contracts without biddings continues.
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Note 1: County Changes Pension Provider
From staff reports (From a government news release as printed in the Neighbor Newspaper)
Douglas County retirees will notice next month that a new organization has taken over the administration of the pension plan in an effort to provide better service and reduce costs.
“This will be a positive change for employees and retirees. The Douglas County Pension Board of Trustees, who will continue to serve as an advisory committee, felt it was in the county’s best interest to turn this plan over to the professional management of the Association County Commissioners of Georgia” said Douglas County Administrator Eric Linton.
The Douglas County Pension Board of Trustees has recommended to the Board of Commissioners ACCG through the Government Employee Benefits Corporation (GEBCorp) take over the administration of the Douglas County defined benefit pension plan as of July 1, 2008.
“It is estimated that this move will save the County approximately $175,275 per year in plan contributions and administrative fees, while enhancing the pension benefit provided to County employees,” said Douglas County Staff Attorney Kelly Pridgen.
ACCG is a nonprofit instrumentality of Georgia’s county governments. GEBCorp manages the pension funds, 401(a) defined contribution plans and 457 deferred compensation plans for approximately 153 Georgia counties, cities and local government authorities.
The pension plan will remain the same except that there will be additional benefits provided at no additional cost to the employees or to the County. For instance, a new disability retirement benefit will be available to qualifying employees. There is also an enhancement to the plan’s death benefit. It provides an immediate lump sum payment to the beneficiaries at the time of death. Under the old plan, beneficiaries had to wait until the date that the deceased would have reached retirement age to receive a monthly annuity.
“I believe the transfer to ACCG/Gebcorp is a major improvement for both the employees and the county. This move will place the management of the pension fund with a group of proven professionals and immediately increase the investment returns,” said Douglas County Chief Deputy Sheriff Stan Copeland who’s also serves as Chairman of the Pension Board.
It is anticipated that administration of the old AIG-VALIC retirement plan (i.e., the 401(a) defined contribution plan and the 457 deferred compensation plan), will be changing to GEBCorp on January 1, 2009. Employees will still have the ability to manage the investment of their retirement money in these plans. Options for AIG-VALIC transitioning are still being discussed.
“It is the County’s hope that consolidating all of the retirement benefits into one organization will make it easier for employees to evaluate and understand their retirement benefits,” Pridgen said.
Note 2: Time line of Douglas County Pension Funds Transfer
Source: Douglas County records and Board of Commissioners’ minutes.
August 29, 2007: Pension Board of Trustees
Board recommends to the BOC that the management of the pension be put out to bid.
September 18th, 2007: Board of Commissioners
BOC authorized to Bid out the DC Pension Plan
December 5, 2007: Pension Board of Trustees
… it was determined that the Staff Attorney would report to the Chairman as to the viability of using a sole source or professional service procurement.
December 10, 2007:
From: Kelly Pridgen [Staff Attorney]
To: Diane Connors [Purchasing Agent]
Subject: FW: Bidding out the pension program
What do you think about the possibility of going with GEBCorp as a sole source procurement for administration of our pension plan (currently in house with the assistance of several consultants, advisors, etc.), 401(a) plan and 457 plan (both currently with VALIC)? I do not know for a fact whether there are any other companies out there who provide that service for all three types of government plans. I have heard (see below) that there are a few companies who have partnered together for purposes of obtaining a contract to provide all three services. However, regardless of whether there are companies that can provide the service for all three types of plans, I don’t think that any other company would relieve us of our fiduciary duty.
Sent: Wednesday, December 12, 2007 5:36 PM
From: Diane Connors [Purchasing Agent]
To: Kelly Pridgen [Staff Attorney]
Subject: RE: Bidding out the pension program
Kelly ~
I’ve reviewed this matter … that this is a professional service … [that] uniquely assumes the transfer of the fiduciary responsibilities of the county. … To further attest to the ACCG being quasi-gov., the ACCG does not have to comply with ERICA (employee retirement income security act), as required by the Federal Government of pension management firms….
February 5, 2008: Board of Commissioners
Accept recommendation of the Employee Pension Board and authorize the change [to GEBCorp]
March 4, 2008: Pension Board of Trustees
Termination of Present Contracts for Transition to GEBCorp
March 6, 2008:
Tom Worthan signed the change [effective July 1st]
June 2, 2008 e-mail from Douglas County to Igor Malanchuk
“ … On your email dated June 2, 2008, you requested the contract between Douglas County and GEB Corps. I have attached a DRAFT that has not yet been presented to the Board or to the Pension Board of Trustees…”
July 2, 2008 Board of Commissioners
Tom Worthan sign Resolution to adapt GebCorps Benefit Plan
Best,
Igor Malanchuk
Campaign Headquarters:
3697 Hwy 5, Suite 6 Douglasville, GA 30135
Tel: (770) 947-8253 Fax: (770) 947-8254
www.Igor2008.com E-mail: Igor@Igor2008.com
Tags: Douglas County Pension
