The California Supreme Court has asked an appellate court to review a proposal approved by voters in 2012 to place new hires in a defined contribution (DC) plan rather than the city’s defined benefit (DB) plan.
Tag: public defined benefit plans
Alternative investments charge higher fees than traditional asset classes such as public equities and fixed income, and according to a study, these fees, in particular, may play a meaningful role in public plan underperformance.
“A cap-weighted strategy skews its way toward the largest stocks, but if plan sponsors own equities in a much more balanced way, it will help with stability,” says Bryan Belton, director, multi asset, at PanAgora Asset Management.
However, the Center for Retirement Research (CRR) at Boston College found portfolio allocation did account for about one-quarter of the total 16-year underperformance for bottom quartile plans.
The original lawsuit alleged negligence and professional malpractice by Willis Towers Watson in its actuarial work for the city; the settlement does not constitute an admission of wrongdoing.
State pensions have a history of “talking with their feet” in a show of activism against undesirable products or actions.
Under the proposed legislation, any employer or public official who willfully fails to make contributions to public pension plans can face a sentence as low as a $100 fine or as high as 10 years in prison.
The NIRS studied the case of Palm Beach, Florida, which it says offers “an important cautionary tale on the detrimental impacts of switching public employees from DB pensions to DC accounts.”