OPERS now jumping into the fray

Second Ohio group jumps in with effort to review its state retirement system

Jim Provance, The Blade, Toledo, Ohio

Sat, July 17, 2021

Jul. 17—COLUMBUS — Even as an outside-funded, deep dive into Ohio teachers' retirement system continues, an effort is under way to do the same with the pension fund for most other government employees.

"There are certain uniquely positive features — including strong participant organizations and board members willing to break from the pack and speak out —with these funds that lead me to believe that these investigations could have very positive outcomes, outcomes that have not happened anywhere else in the United States," said Ted Siedle.

The former Securities Exchange Commission attorney, financial forensics investigator, and co-author of the book "Who Stole My Pension?" has already been hired by a group of about 1,000 retired teachers who've challenged decisions made by the State Teachers Retirement System.

Now a Kickstarter campaign is being launched to raise funds for a similar forensics audit of the Public Employees Retirement System.

Together, the two funds have assets of about $200 billion.

Like the STRS effort, in which retired teachers raised an estimated $75,000 to pay for the audit, a Facebook discussion group, Save Ohio Pensions, for members of all five state employee funds hopes to raise a similar amount for a PERS review.

"I think there's enough known about the STRS audit now," said Paul Guyton, 55, a retired state Department of Rehabilitation and Correction employee from South Charleston near Springfield and a Save Ohio Pensions leader.

"It is clear they're uncovering some things that give good cause for them to call for further action," he said. "For the two to happen in the same time frame is very valuable. We need things to happen. We need the legislature to take note."

PERS spokesman Mike Pramik said the fund has not been contacted by anyone seeking to perform an audit.

Mr. Siedle recently issued what is expected to be the first of a series of preliminary reports examining STRS investment policies.

The report criticizes STRS for a lack of transparency when it comes to earnings and fees associated with alternative investments like those with hedge funds and equity firms. It chastises the legislative Ohio Retirement Study Council for shirking its statutory responsibility to commission an independent audit every 10 years.

Of most interest to its active and retired members, the preliminary report contends that STRS's alternative investments have "massively underperformed" compared to other types of investments.

The report suggests that better earnings from a passive investment strategy and savings from excessive fees and performance-based bonuses to inside staff would have been more than enough to restore retired teachers' annual cost-of-living adjustments that were eliminated in the name of improving the fund's long-term solvency.

The report was part of the reason that STRS board member Wade Steen, an investment expert first appointed by Gov. John Kasich in 2016 and reappointed by Gov. Mike DeWine last year, asked Ohio Attorney General Dave Yost last week to appoint "transparency counsel" for him as he questions what the board has been told.

He urged board leadership in a letter to call a special meeting so that he and incoming board member Rudy Fichtenbaum may pursue discussion of reducing investment costs, restoring the COLA, and reducing the contribution rate for active teachers.

Mr. Fichtenbaum, [Professor Emeritus of Economics] at Wright State University in Dayton, was recently elected to the board to represent retirees and will take his seat on Sept. 1.

"Is there fraud?" Mr. Steen asked in his July 14 letter. "That is a question for others to answer. But based on my analysis, there seems to be questions considering the state used incorrect investment costs which overstated the total fund return, which resulted (in) $7.8 million in performance-based incentives."

Read the rest of the article here. 

Jim Provance is Columbus Bureau Chief at The Toledo Blade.