Texas Municipal’s Executive Director to Retire Next May

David Gavia

The executive director of the Texas Municipal Retirement System is retiring in 2020.

Next May, David Gavia will leave behind a 10-year legacy at the $29.3 billion pension plan, Bill Philibert, the fund’s chair announced. Gavia first joined in 2001 as a general counsel.

Philibert called Gavia the fund’s “dedicated caretaker” for the past decade. He praised the outgoing exec’s communication skills, specifically with policymakers and stakeholders, as well as his “unwavering” ethics and integrity. “Because of David, TMRS is well-positioned to achieve its vision of being the model for empowering retirement,” said Philibert.

With Gavia’s pending departure, the board has begun a search for his replacement.

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“I believe that actions by the board and the staff have made TMRS one of the best-designed retirement systems in the USA,” said Gavia, who called it a “personal goal” to work with the board and staff over the next year to help find the next head.

Under Gavia’s direction, the fund saw various structural changes and achieved an 87.4% funded ratio in 2017 along with a 13.8% return that same year (both were its highest since before the financial crisis).

Actions implemented on Gavia’s watch included diversifying the once bond-heavy portfolio. Its current mix is 33.91% equities, 33.55% fixed income, 10.73% real return, 9.61% real estate, 9.25% absolute return, 2.02% private equity, and 0.93% cash.

He also oversaw a revamping of the retirement system’s actuarial cost methodology, mortality assumptions, and funding structure.

The Texas plan is currently 87.1% funded as of its May 30 actuarial valuation.

The fund expects to hire Gavia’s successor before he departs.

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Tags: David Gavia, Pension, Retirement, Texas Municipal Retirement System

Managers overseeing investments for a retirement fund concerning IBM employees are due to be investigated by the nation’s highest court, after the US Chamber of Commerce implored the justices to decide whether the managers investing in the company’s stock failed to disclose whether it was overvalued.

The plaintiffs in the case stated that the managers of IBM’s retirement fund—the Retirement Plans Committee of IBM—were either cognizant or had sufficient intelligence to determine that the company’s equity was overvalued when allocating employees’ retirement funds towards it.

When IBM sold its computer chip business to GlobalFoundries, the company’s stock price plunged by about 7%, prompting a lawsuit from plan members. That suit was dropped but later revived and allowed to proceed as a class action lawsuit by the US Court of Appeals for the Second Circuit. IBM then countered by asking the Supreme Court to review the lower court’s decision.

The IBM committee argued that such a case “reopens the door to lawyer-driven class actions that spring up after every stock drop.” In the past, courts have rejected similar class action lawsuits, including the retirement plans of Whole Foods, JP Morgan, BP, Target, Radioshack, Citigroup, and others.

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The IBM committee launched a petition that garnered the support from the US Chamber of Commerce, which argued that the case’s arguments discourage plan sponsors from offering employee stock ownership plans in the future.

IBM referred to a similar case–Fifth Third Bancorp vs. Dudenhoeffer—where the Supreme Court ruled that in order to prove a fiduciary breached its responsibilities, the case must allege that there was another strategy the defendant could have legally pursued, and that a fiduciary wouldn’t have thought that halting a transaction would do more harm than good.

“There is simply no denying that allegations deemed sufficient here would not suffice in the fifth and sixth circuits,” IBM said in a prepared statement.

The Supreme Court will tend to the case in its next term, beginning in October.

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Tags: Chamber of Commerce, IBM, Pension, US Supreme Court