Ohio Retired Teachers Association Sues Ohio STRS for Transparency

The Ohio Retired Teachers Association (ORTA) is suing the $80 billion Ohio State Teachers Retirement System (Ohio STRS) to force it to turn over documents in an ongoing audit launched by the association. ORTA says Ohio STRS has not released public financial information required for the audit.

ORTA has raised $75,000 to contract pension audit expert and former Securities and Exchange Commission (SEC) attorney Edward “Ted” Siedle to conduct a forensic audit of Ohio STRS. In February, the law office of former Ohio Attorney General Marc Dann submitted a public records request on behalf of Siedle to Ohio STRS requesting records related to the pension’s investment managers, investment consultants, performance compliance auditor, investment cost monitor, financial auditor, custodians, board, and staff.

“STRS Ohio received the public records request in late February and to date has provided 140 documents, totaling thousands of pages,” Ohio STRS spokesman Nick Treneff told CIO. “STRS Ohio has fully complied with the law in response to this request and will vigorously defend any lawsuit filed in this matter.”

ORTA said that although Ohio STRS provided hundreds of pages of documents, it has refused to include key documents about the pension fund’s investments in private equity and hedge funds. ORTA says the documents it is seeking are critical to Siedle’s ability to understand the value and appropriateness of the investments. The association said many of the public records were withheld at the request of the investment managers and that Ohio law requires that the records be provided to the public on request.

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“After months of denials of requested information and slow walking the responses, the decision has been made to file a lawsuit to compel transparency,” ORTA said.

One of the reasons the association is seeking to audit in the fund’s management is because of the revelation in March that Ohio STRS lost at least $525 million from an investment in private equity firm Panda Power Funds.

Robin Rayfield, executive director of ORTA, said he reviewed the investments of Ohio STRS and found that the losses from Panda Power could be even worse than expected. He said the pension fund invested in five other funds that may have also put additional money into Panda Power, and that, as a result, Ohio STRS’ losses from the investment could be as high as $1.5 billion.

While Ohio STRS says the loss is insignificant compared to the total asset value of the retirement fund, Rayfield said the loss had been unreported for years and would have paid for more than two years of cost of living adjustments (COLAs) for retirees, which were eliminated in 2017.

Rayfield also said that Wade Steen, a certified public accountant (CPA) appointed by Ohio Gov. Mike DeWine to serve on the Ohio STRS Board, asked the pension fund’s officers “some difficult questions” during a recent meeting.

Rayfield said that based on their responses, Steen concluded that the pension’s audits are not actual audits, but merely reviews of the information that Ohio STRS feeds the company performing the service. And when Steen sought facts to back up Ohio STRS’ claims that fund manager bonuses are based on performance benchmarks, Steen determined that there are no actual benchmarks used to determine bonuses.

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Tags: COLA, Lawsuits, Ohio Retired Teachers Association, Ohio State Teachers Retirement System (OSTRS), ORTA, Robin Rayfield, Ted Siedle, Transparency

The New York City Council has passed a bill that would create a mandatory individual retirement account (IRA) program for employees of private sector employers that do not offer a retirement plan and have five or more employees. The council also passed another bill that would establish a board to oversee the retirement savings program.

The first bill would amend New York City’s administrative code to establish an automatic enrollment, payroll deduction retirement savings program for certain self-employed individuals and employees of private entities. The retirement plan would default to a Roth IRA with a contribution rate of 5% and an option to change rates up to the annual IRA maximum of $6,000—or $7,000 if age 50 or older—or choose a regular IRA.

The plan would also be portable, so when employees switch jobs they would be able to continue to contribute to their accounts or roll them over into other retirement savings plans. Employers would not contribute on behalf of employees.

According to the backers of the bill, which was sponsored by council member Ben Kallos, 40% of New Yorkers near retirement age have less than $10,000 saved for retirement, and 1.5 million private-sector workers in New York City do not have access to retirement plans through their employers.

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“This legislation is a huge first step in helping generations of New Yorkers working for small businesses to save and be that much more ready to be self-sufficient when it is time to retire,” Kallos, who is an Employee Retirement Income Security Act (ERISA) attorney, said in a statement. “With this legislation, New York City is leading the way by providing residents something in addition to their Social Security.”

The second related bill passed by the City Council would create a retirement savings board to oversee the city’s retirement savings program and would establish powers of the city comptroller and other provisions in relation to the retirement program. The board would consist of three members appointed by the mayor. Their powers would include setting the program’s start date, entering into contracts with financial institutions and administrators, minimizing the program’s administration fees and costs, and creating a process for those not employed by a covered employer to participate.

The board would also work with the comptroller to select investment strategies and policies and would be required to report annually on its activities and actions. Although the bill would take effect in 90 days after being signed into law by the mayor, the board would have up to two years to implement the program.