Disclosure Violations Added to Colorado's Pension Problems

According to the Associated Press, the State Auditor’s Office reported to the Legislative Audit Committee that nine PERA staff members had accepted tickets to sporting events, a fishing trip, and an ice show dinner, as well as other gifts totaling $210.   Since the policy allows staffers to accept gifts, but anything worth more than $100 must be reported, “Each instance is a clear violation of PERA’s disclosure policy,” auditors said in their report.

In the report, the AP said, auditors suggestedPERA adopt a policy requiring investment consultants to disclose potential conflicts of interest, including relationships with PERA’s investment managers and any gifts, travel or entertainment they give PERA trustee or staff.   

The report also criticized PERA managers for spending around $12,000 on gift cards used as employee awards in a wellness program and for years of service, according to the AP.   The auditors also found that PERA had paid $1.1 million to employees from 2002 to 2004 as part of a program allowing them to cash out unused personal time when they terminated.

The Rocky Mountain News reported that at the time PERA employees could bank up to 52 weeks of personal leave time to be cashed out upon retirement or resignation.   One employee, who retired as deputy executive director of investments in April 2003, cashed out $240,564.   Auditors in this week’s report suggested a close review of leave policies, according to the AP.

In addition to the extremely generous leave policy for cashing out personal days, PERA’s executive director, Meredith Williams, in a presentation given to the fund’s board also revealed:

• PERA, which asks its members to shoulder a portion of their health care costs in retirement and has a drastically underfunded health plan, gave health care benefits for life to six former executives. Two have received the retirement payments for more than 20 years.
• Since 1995, PERA has spent $429,000 on new cars and car allowances for executives. PERA bought 16 cars – Jeep Grand Cherokees, Chrysler Town & Countries and Ford Explorers among them – for the executive director and three top deputies, who typically traded them in after 50,000 miles. Other top executives, up to five per year, chose to take a car allowance that paid them $1,125 a month. The program, Williams said, appears to have been designed to hide PERA executives’ true compensation from anyone who looked only at salary figures.
• PERA gave as many as five of its top executives “longevity bonuses” of as much as 20% of their annual salary every three years, even as the fund’s investments were doing poorly. With the special payments added to their salary and annual bonus, some deputy executive directors saw their total pay hit about $300,000 a year on occasion.
• PERA employees at one time were allowed to “purchase” years of service to add to their total years of service used in calculating benefits.   This benefit added hundreds of millions of dollars in liabilities but gave PERA just a fraction of the cash to pay for the benefits.

The fund, which has a $12.8 billion deficit and is only about 70% funded (See  Another State Pension System Reports Trouble ), has made efforts to curb benefits to members.   PERA staffers can now only bank 26 weeks of personal time to cash out upon termination, The Rocky Mountain News reports, and the monthly car allowance has been reduced to $750.   But, these benefits are still more generous than those for other state employees.

The fund, which manages about $32 billion and has more than 361,000 members, has blamed market losses and increased benefits, along with pension accounting rules, for its widening shortfall.