Pension funds should be transparent

State Employees’ Retirement System and the Public School Employees’ Retirement System must be visible.

Over the past 10 years, hundreds of money managers have reaped $3.8 billion in profitsharing from the state’s two big pension funds, without anyone disclosing that information to the state auditor general or the public.

This was on top of the $2.2 billion the firms raked in for management fees that were publicly disclosed.

It’s time to derail the gravy train.

The State Employees’ Retirement System and the Public School Employees’ Retirement System must be held to a new level of transparency that includes an annual public accounting of every penny received by a manager.

Some officials, including Treasurer Joe Torsella and Auditor General Eugene DePasquale, had been complaining about the over-the-top $2.2 billion in management fees before they knew about the firms’ profitsharing.

Mr. Torsella’s office said the pension funds don’t consider all investment contract information to be public record, and Mr. DePasquale’s office said the firms’ profit-sharing wasn’t detected on audits that did result in criticism about the management fees.

The sums taken by the firms are offensive partly because the funds themselves continue to struggle, valued at only about 60 percent of what is needed to meet long-term financial obligations to hundred of thousands of retired teachers, state troopers, corrections officers and other government workers.

In May, before details of the firms’ profit-sharing surfaced, Mr. Torsella told a conference of local government officials that among the 63 U.S. public pension plans with $10 billion or more in assets, SERS had the third-worst performance and 13th-highest fees paid over 10 years.

PSERS had the eighthworst performance and fifthhighest management fees over the same period.

He based the comment on a Boston College database of plan performance. The firms’ profit-sharing came to light through the work of a Public Pension Management and Asset Investment Review Commission, created by the Legislature to study pension fund performance and costs.

SERS and PSERS disclose management fees but traditionally have not tracked or reported profit sharing. Both say that is about to change. SERS says it will determine whether the information can be made public; PSERS said it will publicly disclose the information. If a change in the right-to-know law is needed to compel public disclosure of such data, the Legislature should make it.

Officials also should revisit the profit-sharing arrangement with management firms.

Money generated by the funds should stay with the funds, not flow quietly into the hands of third parties who operate without public scrutiny.

Over the past 10 years, hundreds of money managers have reaped $3.8 billion in profitsharing from the state’s two big pension funds, without anyone disclosing that information to the state auditor general or the public. This was on top of the $2.2 billion the firms raked in for management fees that were publicly disclosed. It’s time to derail the gravy train.