NCPERS’ Hank Kim Responds to The Philadelphia Inquirer’s Allegations Against the Pennsylvania Public School Employees’ Retirement System
Following a year-long crusade against the Pennsylvania Public School Employees' Retirement System (PSERS), The Philadelphia Inquirer published a story announcing that the U.S. Department of Justice will not be pursuing civil or criminal charges.It all began with a shared risk calculation error that occurred in late 2020. The board of PSERS in March 2021 uncovered and corrected a calculation error on an investment return for a single month (April 2015). The tweak resulted in a decline in the nine-year average return from the previously reported 6.38 percent to 6.34 percent, versus a benchmark of 6.36 percent.
An error is no laughing matter, especially when measured against what was at the time a $64 billion fund. (Outstanding investment performance subsequently helped to lift assets to $75 billion at the end of 2021.) But miscalculations can and do occur, and that doesn't mean that anything nefarious is going on. Competent organizations and their service providers can make mistakes. When they discover them, they do precisely what PSERS did: They correct their errors, publicly and plainly. And they investigate.
Ironically, as The Inquirer announced earlier this month that no charges were being pursued, it also chose to criticize PSERS for the cost of the investigation, which was conducted independently by the law firm Womble Bond. Perhaps its editorial team was simply hoping for a more newsworthy scandal.
The media coverage of this non-story has consistently generated far more heat than light. It has ended the careers of at least two pension executives, for what turns out to be no good reason. It's hard to imagine what was going through the minds of the irresponsible fiduciaries who provided anonymous tips and documents to their buddy at The Inquirer. Last week, the newspaper published a letter to the editor from NCPERS' Hank Kim asking its journalists to “look inwards and consider how it forced PSERS to waste public employees' hard-earned dollars on its wild goose chase.”
Lessons can be learned, however, from PSERS' experience. It is essential that public pension boards have thorough plan governance training. One way to achieve this is attending NCPERS Accredited Fiduciary (NAF) program. This twice-a-year trustee accreditation program is designed specifically for individuals involved in public pension governance, with in-depth training on governance, oversight, and administration. The next NAF program will be held October 22-23 in Nashville, Tennessee. Learn more and register here.