According to a news report in the Lincoln Journal Star, the report documented instances of accounts with errors that ranged from an understatement of $4,111 to an overstatement of $4,407. Many of the recordkeeping problems amounted to less than $100 per account, the report said.
The Nebraska Public Employees Retirement System is
responsible for maintaining about 30,000 accounts for
state and county employees.
“A 96% error-free rate might be terrific for a high school algebra student, but in the financial world, an error rate in excess of 4% on accounts with over $1.5 billion in net assets cannot be tolerated,” Foley told the newspaper.
The news report said some accounting problems occurred last summer when the agency changed from Ameritas’ recordkeeping service to Union Bank and Trust. Foley found that communication problems may have played a part as well as apparent confusion by state agency officials over Union Bank’s recordkeeping platform.
Because of the accounting issues, the agency ultimately got Union Bank to voluntarily withdraw from its contract with the state, said Denis Blank, Nebraska Public Employees Retirement Board chairman, according to the newspaper. The state returned the recordkeeping business to Ameritas.
Going back to Ameritas cost about $185,000 in a
reconciliation fee, the newspaper said. The fee was
spread over plan participants’ accounts, and is costing
each one 60-cents a month.
Foley found that significant account errors were more likely for participants who transferred money between investment options or took distributions between July and September 2006. Of the accounts auditors tested where participants had transferred money, Foley’s office found nearly three-quarters (72%) had errors. The errors ranged from understatements of $2,128 to overstatements of $4,407.
The retirement system has sent letters to participants with information, statements and a form to fill out if they find a problem with their account. Participants were first told about potential problems in October.
The problems do not affect retirement plans for schools, judges and the Nebraska State Patrol, according to the news story.
Foley’s report is here .