|Posted:||December 15, 2020 12:56 PM|
|From:||Representative Brett R. Miller|
|To:||All House members|
|Subject:||Pension Fund Fee Transparency Legislation|
|In the near future, I intend to re-introduce legislation (former HB 1964 from last session) that will require more robust and transparent management fee reporting standards from SERS and PSERS. This bill passed the House unanimously in the 2017-18 session and the House State Government Committee in 2019-20 but session expired before the bill advanced further.
This legislation incorporates the transparency recommendations found in the Public Pension Management and Asset Investment Review Commission’s (PPMAIRC) report. With the goal of increasing transparency to plan members and taxpayers, this legislation is designed to give a complete picture of fees, costs and expenses associated with investments. It will also expand access to board proceedings, investment materials utilized, as well as increasing performance fee reporting, particularly fees associated with carried interest.
Most public retirement systems pay performance-based fees and expenses to external investment managers as part of their compensation, but these fees, particularly those associated with alternative investments such as private equity, real estate, and hedge funds, often go unreported or under-reported. These hidden fees can amount to hundreds of millions, even billions of dollars which ultimately take away from pension fund balances needed to pay pension obligations.
The increased reporting requirements are based on the Institutional Limited Partners Association's (ILPA) Fee Transparency Initiative which is a national effort to establish comprehensive standards for total fee and expense reporting by private equity managers and their investors. Twenty states and the District of Columbia have already formally adopted these reporting standards.
Public reporting based on the ILPA standards will help ensure the solvency of the plan by exposing potentially high and unnecessary management fees as well as poor performing portfolio allocations. Since plan participants rely on these funds, and since taxpayers must pay for them, both have a right to know the full extent of plan expenses. Adopting these standards will ensure maximum transparency and openness to the public and will play a significant role in achieving the projected actuarial savings of billions of dollars in public pension costs that the PPMAIRC anticipates.
Co-sponsors from last session include: B. MILLER, RYAN, GREINER, GROVE, SCHEMEL, TOBASH, HICKERNELL, OWLETT, IRVIN, BERNSTINE, DUSH, KAUFFMAN, MOUL, FEE, MILLARD, GILLEN, KEEFER, COX, ZIMMERMAN, MENTZER, NELSON, GLEIM, LAWRENCE, ROAE, DIAMOND, BENNINGHOFF, RADER, WENTLING, COOK, GREGORY, SCHMITT, WHEELAND, EMRICK, KLUNK, ECKER, METCALFE, FRITZ, SOLOMON, SCHLEGEL CULVER, O'NEAL, SAYLOR, HERSHEY, ROTHMAN, FREEMAN, RAPP, STAATS, LEWIS, SANCHEZ, TOPPER, EVERETT, GAYDOS, DUNBAR, MALONEY, KORTZ, DAY, REESE, JAMES, GABLER, JONES, CALTAGIRONE, MACKENZIE, DOWLING, KAUFER, WARNER AND KNOWLES.
Please join me in co-sponsoring this legislation to increase transparency in our public pension systems.