(The Center Square) – The Pennsylvania Public School Employees’ Retirement System recently announced two top executives will retire after calls by several board members for their resignations last summer over errors and poor investment performance.
PSERS Board Chair Chris Santa Maria issued a statement late last week that praised Chief Investment Officer Jim Grossman and Executive Director Glen Grell for their service and announced their planned retirement next spring.
The move followed months of controversy at one of the country’s largest pension funds related to a financial reporting error that overstated the fund’s nine-year performance. The figure calculated by a consultant and certified in December 2020 was 6.38%, just above the 6.36% threshold for triggering an increase in contributions from about 100,000 active school employees.
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PSERS management informed the board in March that errors in data used to calculate the return meant the fund actually fell below the 6.36% threshold, which means a rate increase should take effect next July.
The PSERS board vowed to investigate the error, and the FBI and U.S. Securities and Exchange Commission since have launched investigations that are ongoing. The FBI investigation involves not only the error but also land purchases in Harrisburg and the relationship between PSERS employees and contracted investment consultants and advisors, according to The Associated Press.
“Jim Grossman has been an integral part of the PSERS Investment Office for more than 24 years, including service as PSERS’ Chief Investment Officer since 2013,” Santa Maria wrote in Thursday’s announcement. “During Jim’s tenure as CIO, the Fund’s total net assets have grown from $49 billion to $72 billion. Jim’s guidance and leadership have been important over the last several years as the Fund has continued to recover from the Great Financial Crisis and improve its funding status.”
The notice detailed Grossman’s work heading the investment program, advising the board on asset allocation and work with PSERS external investment advisers.
“Jim will transition to the position of Senior Advisor effective December 9, 2021, and will assist in the transition to a new Chief Investment Officer until May 1, 2022, when his retirement will be effective,” Santa Maria wrote.
In a separate announcement, Santa Maria described Grell’s “many accomplishments” since he took over as executive director in 2015 after years as a board trustee, including advocacy for fully funding the pension system, and leadership with other changes required by law.
“Glen led the implementation of a new defined contribution plan as required under legislation passed in 2017, as well as substantial technical upgrades to the pension administration system,” Santa Maria wrote. “Under Glen’s leadership the agency has become more user friendly, allowing PSERS members to complete transactions through the member self-service portal.”
The announcement also praised Grell’s leadership during the COVID-19 pandemic and noted PSERS did not miss any payments to any of its 236,000 annuitants during a transition to remote work last year.
“Glen will transition to the position of Senior Advisor effective January 1, 2022, and will assist in the transition to a new Executive Director until February 28, 2022, when his retirement will be effective,” Santa Maria wrote.
The AP reported the separation agreements for Grell and Grossman are not yet finalized. Grell is paid $227,000 annually, while Grossman is paid $485,000 a year, according to online records cited by the news wire.
In a letter to Santa Maria on June 10, several PSERS board members and state officials called for resignations from Grell and Grossman over the nine-year rate calculation and poor investment performance, which allegedly has cost taxpayers well over $1 billion.
“On Dec. 31, 2020, PSERS’ pension investments stood at $62.4 billion. If PSERS’ investment performance had been as good as the best public plans over the last ten years, those assets would now be approximately $80.87 billion. If PSERS’ performance had simply been average, those assets would now be approximately $67.73 billion,” the letter read.
‘If PSERS’ investment performance had been as good as the best public plans over the last ten years, those assets would now be approximately $80.87 billion.’
“Moreover, PSERS’ poor investment performance has increased the amount employers are required to contribute to the plan. In Fiscal Year 2021-22, the employer contribution rate to SPERS will be $4.99 billion. Instead, if PSERS’ current net position reflected the asset growth that better performance would have provided, the Fiscal Year 2021-22 employer contribution would have been approximately $460 million or $1.73 billion less, under median and top quartile performance, respectively.”
The letter was signed by State Treasurer Stacy Garrtity; Noe Ortega, acting secretary of education; former state treasurer Joseph Torsella; Richard Vague, secretary of Banking and Securities; state Sen. Katie Muth, D-Berks; and Nathan Mains, CEO for the Pennsylvania School Board Association.
Victor Skinner writes for The Center Square.
This article was republished with permission from The Center Square.