Stricter reporting standards may be on the way to alternative investment in Pennsylvania | The state

The proposed bill would change this state of affairs by requiring a report to the General Assembly on pension fund fees for alternative investments, which would allow the public to know how much investment managers earn from state pensions.

HB1671authored by Brett Miller’s representative, R-Lancaster, echoes recommendations from the 2018 Commonwealth Pensions Commission report.

“I was interested in the fact that for alternative investments, particularly in Pennsylvania, a member of the General Assembly could not receive fees,” Miller said. “The participant, the beneficiary, the recipient of pension funds could not know what contributions. No member of the public could receive these fees. It seemed to me that what we believed about in terms of transparency was not clear. “

These fees are no trifle.

“These hidden payments could amount to hundreds of millions, even billions of dollars, which ultimately take away the balances of pension funds needed to pay pension obligations,” Miller wrote in legislative note.

These pension liabilities are not in full. Although pension systems have improved in recent years, the civil service pension system was funded by only 59.2% in 2021, while the civil service pension system was funded by 59.4% in 2020. This means that PSERS has unfunded accrued liabilities of $ 44 billion SERS has liabilities of $ 22.4 billion.

Tax Fund ranked Pennsylvania ranks 41st in the country in funding state pension systems. On average, the country’s funding ratio is approaching 72%.

The bill will require the Public Schools Retirement Council and the Civil Servants Retirement Council to broadcast their meetings live and post written records of their meetings online. Other records related to investment boards will be considered publicly available, with some exceptions for confidential information.

Alternative investment funds, which are investments that are not stocks or bonds, such as real estate transactions, will be subject to additional disclosure requirements, such as the rate of return on those investments. Most importantly, the management fees, costs and expenses paid for these investments will become public.

SERS and PSERS will also be required to publish the results of fees for all investments and a detailed list of fees and expenses paid to the investment manager, along with travel or other system staff costs paid by the external investment manager, fund or advisor.

More awareness of fees may mean better management of public pensions. The ability of the tax base to fund state pensions is “a big, huge problem,” Miller said.