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Abbott calls for pension plan accountability

Posted Monday, September 29, 2008

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Texas Attorney General Greg Abbott has launched a user-friendly new Web page to help taxpayers and public employees better understand government pension plans. In the wake of recent instability in the country’s financial markets, Abbott reiterated the importance of accountable, transparent taxpayer-funded pension plans.

According to data obtained from the Texas Pension Review Board, more than 80 taxpayer funded pensions have unfunded liabilities that exceed $20 billion. The Office of the Attorney General’s new pension plan Web page can be found on the agency’s Web site at www.texasattorneygeneral.gov.

“Improperly managed public pensions pose a financial threat to public employees and the taxpayers alike,” Abbott said. “With our nation’s financial markets in turmoil, now is the time to ensure taxpayer-funded pensions are transparent and accountable. Governments must meet their funding obligations, managers must wisely manage pension funds, and pensions must give taxpayers access to adequate information about their financial health.”

The Office of the Attorney General does not have direct regulatory authority over public pension plans. The Texas Pension Review Board is responsible for overseeing Texas pensions. However, to increase transparency and improve accountability, Abbott offered three simple steps that taxpayers and public employees can take to better understand government retirement systems:

* Review plan information. All public employees should carefully read and become familiar with the retirement benefits provided by their pension plans. Plan administrators often distribute important materials to their members through mail, e- mail, brochures and Web sites.

* Contact pension plan administrators. Public pension fund administrators can provide critical information about a particular plan, including fund performance measures, plan trustees and managers experience, and pensions’ unfunded liability data.

* Contact the Texas Pension Review Board. The Texas Pension Review Board (PRB) oversees state and local government retirement systems and is a clearinghouse for valuable information about each public pension fund. Texans can contact the PRB by telephone at (800) 213-9425 or online at www.prb.state.tx.us.

In 2007, Abbott made several recommendations for improving public pension fund management to attendees at the Texas Pension Review Board Conference annual meeting. Those suggestions included:

* Transparency – Public pension funds are responsible to the taxpayers and their resources belong to public employees. Public retirement systems should fully comply with a Texas law requiring them to file annual financial reports with the PRB. Lawmakers who wish to improve compliance could expand both the Attorney General and the PRB’s enforcement authority.

* Good governance – Effective investment decision-making requires a balanced viewpoint and analysis among pension board members and managers. Pension plans should balance trustees representing employer interests with those representing employee/beneficiary interests, while also having an independent trustee with investment and/or pension fund expertise. Public pensions should have at least one staff member with pension fund/investment expertise and should employ independent professional investment advisors.

* Realistic actuarial assumptions – Overly optimistic and unrealistic actuarial assumptions can lead to unfunded liabilities. All actuaries involved with public pension plans should be required to register with the PRB. The PRB should work with registered actuaries to develop standards and best practices that discourage unrealistic financial assumptions.

* Eliminate conflicts of interest – Conflicts of interest can impair investment decision-making. Pension board members and/or plan managers should be required to file conflicts of interest disclosures with the PRB. Pension plan board trustees and/or pension managers also should be subject to a revolving door policy. For a specific period of time, they should be prohibited from working with entities that conducted business with the pension board.

For more information on public pension plans, contact the Texas Pension Review Board at (800) 213-9425 or online at www.prb.state.tx.us.

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