Pension system’s staff earned their compensation

In response to the Saturday editorial “Results, then compensation,” I’ve provided rationale and response to issues raised regarding the recent pay increases of investment professionals with the statewide Public Safety Personnel Retirement System.

Like the private sector, system trustees try to compensate the system’s investment professionals with competitive wages in comparison to the marketplace, while also rewarding superior performance.

This compensation model allows the retirement system to attract and retain the best and brightest investment professionals, which is key to improving the health of the fund.

The editorial questions compensation being tied to performance by asking, “Tied to what?”

In short, the pay increases are tied to a successful return, especially in light of the increased responsibilities of the investment staff. During fiscal year 2013, the fund exceeded its benchmark, adding approximately $35 million in additional value.

In private and public sectors and previously with the public safety retirement system, such performance would be rewarded by a bonus.

In contrast, in September, the system board, at the request of the staff, suspended the bonus program to demonstrate their commitment to beneficiaries and taxpayers and put an end to questions about the fairness of the current bonus

BRIAN TOBIN structure.

Contrary to the editorial’s claim that “The pension’s embarrassed board suspended that program in September,” the board’s vote was the result of an ongoing working relationship between the system board and investment professionals to adopt practices that are best for the fund.

Also concerning is the editorial’s references to the salary increases as “bonuses.” These funds are not bonuses; rather investment staff members were given raises due to increased responsibilities and market considerations.

In response to the departure of three investment professionals, the retirement system conducted a review of the department’s responsibilities and necessary resources. As a result, three vacant positions were eliminated and responsibilities were reallocated.

Considering this shift in responsibilities and the need to offer a competitive compensation package, the administrator and a majority of the board decided it was appropriate to adjust wages for just four investment professionals.

It is important to note that the suggested compensation increases were not arrived at arbitrarily, but are a result of a global HR market-based “Buck Consultants” compensation study.

The change in the department’s compensation (through forfeited bonuses and payroll savings resulting from the elimination of three staff positions) will reduce expenditures by $458,308 — even after factoring in the $69,500 in adjustments that the board approved for the four investment professionals.

At a time when the retirement system is doing more with less, the board’s trustees continue to rely on the investment staff to continue to diversify the system’s financial market exposures to reduce the risk of losses when the financial markets perform poorly.

Also, we recognize that investment staff members are assets that must be protected. Losing key personnel could compromise vital progress we’re making in the wake of two consecutive economic and financial market downturns that greatly reduced the system’s asset values — downturns over which the system’s investment staff had no control and for which they cannot be blamed.