S.C. pension system pays record fees, gets high return

abeam@thestate.comNovember 21, 2013 

  • Pension fund posts $1.6 billion gain South Carolina’s largest financial asset is its $26.5 billion retirement fund, managed by the State Retirement Investment Commission. Here’s a look at how the fund performed during the fiscal year that ended June 30:

    Balance at the start of the year: $24.9 billion

    Employee contributions: $775.6 million

    Taxpayer contributions: $1.1 billion

    Investment income: $2.96 billion

    Fees paid: $419.6 million

    Benefits paid from the fund: $2.9 billion

    Balance at the end of the year: $26.5 billion

South Carolina’s $27 billion retirement fund for state workers paid more than $400 million in management fees last year, a 33 percent jump from the previous fiscal year.

But the higher fees – the highest the plan ever has reported – also came with higher returns. The fund added more than $1.5 billion in total value during the fiscal year that ended June 30, putting its total value at $26.5 billion.

In the fiscal year that ended June 30, 2012, the fund’s fees were down, but the pension fund also lost nearly $1 billion in value.

The higher fees are part of an ongoing dispute within the state Retirement Investment Commission – the board with five voting members that manages the pension system’s investments – about the best way to manage the state’s largest asset. The commission meets today to review the numbers.

State Treasurer Curtis Loftis, a Lexington Republican who is running for re-election in 2014, said the commission is being irresponsible by paying such high fees to wealthy investment managers.

“These fees are an outrageous transfer of wealth from people who drive Kias and pickup trucks ... to people who drive limousines and helicopters,” Loftis said. “It’s a sin, in my opinion.”

During the fiscal year that ended June 30, employees contributed $775 million to the fund, while their employers – government agencies whose budgets are made up of taxpayer dollars – put in $1.1 billion. The fund made a $2.5 billion return on its investments, after paying the fees, and paid out $2.9 billion in benefits.

The $419 million in fees paid equaled 1.57 percent of the $26.5 billion in the fund. The National Council of Public Employee Retirement Systems said the average management fee paid by similar funds was 0.57 percent.

Officials estimate the state’s five retirement systems – covering state workers, teachers, local government workers, police officers and National Guard members – does not have enough money to meet its obligations over the next 30 years, falling $15.6 billion short.

“You don’t want to give away money,” Loftis said.

Greg Ryberg, the Retirement Investment Commission’s new chief operating officer, said pension plans are so complex and vary so much, from state to state, that it is unfair to compare them.

Ryberg added Loftis is the one guilty of wasting taxpayer money. He said Loftis authorized $9 million in legal fees to get an extra $8 million in settlement money in a longstanding lawsuit with the Bank of New York – the bank that holds the state’s retirement account.

“I am proud of our returns,” Ryberg said. “I will let others speak for themselves.”

Alex Stroman, a spokesman for Loftis, said the Bank of New York – not S.C. taxpayers – paid those legal fees. He said Ryberg was “making up stories.”

Ryberg and Loftis have been political enemies since 2012, when Ryberg – then a Republican state senator from Aiken – tried to remove Loftis from the investment commission.

Thursday’s meeting will be the first of the commission since Ryberg was named chief operating officer. The commission’s previous chief operating officer quit in protest after, he said, Loftis cursed at him on the telephone.

Loftis has had a tumultuous relationship with the commission. Last year, the commission voted unanimously year to censure him for “engaging in false, misleading and deceitful rhetoric.”

But Loftis says he does not plan to change his tactics.

“I’ve accomplished nothing by being nice to them,” Loftis said.

Reach Beam at (803) 386-7038.

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