PRB: Pooled Assets Legislation Not
Likely in 2019 Session
by Joe Gimenez, Guest Writer
Texas
Pension Review Board Chairman Josh McGee backed down from committing to a
legislative effort to enable or require asset pooling for small pension systems.
His comments, made at the tail end of the Oct. 4 PRB meeting, recognized
concerns from TEXPERS Board President Paul Brown and board member David Stacy.
“The Board… fully
agrees that this is a first step that is trying to highlight the issue and hopefully
get to a point where we do the appropriate investigation and resource that
investigation properly to get to an actual solution,” McGee said. “I personally
do not anticipate any big movement other than additional study in this [2019
legislative] session. But we want to get to a place where we are actually
looking at it and devising a potential solution.”
McGee took the
unusual step of making those comments after Brown and Stacy expressed concern
in public comments about the first draft of the asset pooling study unveiled
earlier in the meeting.
“TEXPERS
represents 80 of the 90-something plans that come under your purview, and
40-something of those are the small TLFFRA funds,” Brown says. “There was an
excellent opportunity just a couple of days ago in Temple to have this kind of
conversation with the small (TLFFRA) funds… That organization is represented by
a foundation. It has its own board. I would encourage that (PRB) staff; the board at least have a conversation with that Foundation’s Board regarding their
input and getting their opinion on what their thoughts are in regard to this
(asset pooling initiative).”
TLFRRA funds are
the 42 systems governed by the Texas Local Fire Fighters Retirement Act. Any
asset pooling initiative would likely include many of those, but there are also
small systems for police and other public employees as well. The PRB study did
not define whether asset pooling would occur by choice of the systems or
mandated by the state.
Stacy also
encouraged collaboration between the PRB and the smaller pension funds.
“Over
10 years ago the office of Firefighters Pension Commission brought this up as a
viable possibility, but unfortunately the office staff did not have the
bandwidth to take on the technical, structural, and legal issues that this
raised,” Stacy says. “I would like for the Board to recognize that if this is
truly to be a good possibility … it warrants trying to work out the details in
order that all parties can see it as such.”
Earlier in the
meeting, PRB staff had unveiled its first draft of “Asset Pooling for Small
Pension Systems.” The PRB modeled the potential impact of investment management
pooling and also investment management and administration pooling. The models
suggested that the systems might have seen a 29 percent increase, or $32
million, in total assets between 2007 and 2016 primarily related to lower fees
and administrative costs. The 16 pension funds which each had less than $12
million in assets had the highest average expenses compared to 17 systems with
assets less than $32 million and more than $12 million.
The PRB’s actuary
member, Marcia Dush, commented that asset pooling might not achieve economies of
scale for investment purposes without at least $300-$500 million in combined
funds. To reach that number, 35 pension systems with the least amount of assets
would be needed in a pooling effort. See Chart 1 below with those systems whose
assets would combine to $535 million if they were mandated to be part of a
pooling effort. The PRB has not discussed such a mandate, nor is it
included in the report. The list below seeks only to identify the smallest
systems which could combine to reach the scale needed according to Dush.
Chart 1.
Small
pension funds needed to reach $500 million in combined assets to achieve
economies of scale for fee and cost reductions
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Killeen Firemen's Relief
& Retirement Fund
|
$35,342,830
|
|
Corpus Christi Regional
Transportation Authority
|
$32,583,077
|
|
Texarkana Firemen's Relief
& Retirement Fund
|
$31,777,180
|
|
Capital MTA Retirement Plan
for Bargaining Unit Employees
|
$29,535,196
|
|
Harlingen Firemen's Relief
& Retirement Fund
|
$28,747,083
|
|
Guadalupe-Blanco River
Authority
|
$26,632,375
|
|
The Woodlands Firefighters'
Retirement System
|
$26,188,804
|
|
Capital MTA Retirement Plan
for Administrative Employees
|
$23,811,865
|
|
Conroe Fire Fighters'
Retirement Fund
|
$22,529,049
|
|
Cleburne Firemen's Relief
& Retirement Fund
|
$21,323,149
|
|
Northwest Texas Healthcare
System Retirement Plan
|
$19,960,895
|
|
Galveston Employees'
Retirement Plan for Police
|
$19,784,817
|
|
Brazos River Authority
Retirement Plan
|
$18,726,771
|
|
Denison Firemen's Relief
& Retirement Fund
|
$15,721,368
|
|
Travis County ESD #6
Firefighter's Relief & Retirement Fund
|
$15,043,500
|
|
Texas City Firemen's Relief
& Retirement Fund
|
$14,412,584
|
|
Lufkin Firemen's Relief &
Retirement Fund
|
$14,335,797
|
|
Waxahachie Firemen's Relief
& Retirement Fund
|
$14,201,159
|
|
Greenville Firemen's Relief
& Retirement Fund
|
$12,728,162
|
|
Galveston Wharves Pension
Plan
|
$11,895,228
|
|
Big Spring Firemen's Relief
& Retirement Fund
|
$10,387,399
|
|
Colorado River Municipal
Water District Defined Benefit Retirement Plan & Trust
|
$9,660,662
|
|
University Park Firemen's
Relief & Retirement Fund
|
$9,448,371
|
|
Weslaco Firemen's Relief
& Retirement Fund
|
$9,186,148
|
|
Corsicana Firemen's Relief
& Retirement Fund
|
$8,344,317
|
|
Orange Firemen's Relief &
Retirement Fund
|
$8,154,598
|
|
Sweetwater Firemen's Relief
& Retirement Fund
|
$7,826,879
|
|
Marshall Firemen's Relief
& Retirement Fund
|
$7,712,228
|
|
Plainview Firemen's Relief
& Retirement Fund
|
$5,427,943
|
|
Paris Firefighters' Relief
& Retirement Fund
|
$4,764,272
|
|
Atlanta Firemen's Relief
& Retirement Fund
|
$3,744,867
|
|
Brownwood Firemen's Relief
& Retirement Fund
|
$3,617,575
|
|
San Benito Firemen Relief
& Retirement Fund
|
$2,987,515
|
|
Arlington Employees Deferred
Income Plan
|
$2,727,969
|
|
Refugio County Memorial
Hospital District Retirement Plan
|
$2,051,124
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