Ted Ballantine | Pension360

McDonald’s Has Sued Russia Pension Fund 8 Times Since 2013

Russian McDonald’s employees are having trouble adding recent wages to their future pension calculations. As a result, McDonald’s has sued the Russia Pension Fund 8 times since the problem started in the third quarter of 2013. Reported by RIA Novosti:

McDonald’s has filed at least eight lawsuits against Russia’s Pension Fund, saying it refused to accept relevant documents from the company, as a result of which McDonald’s Russia employees’ pensions have not been accumulated since 2013, Russian Izvestia newspaper reported Friday.

“Starting from the third quarter of 2013 and until today, in response to submitted documentation, McDonald’s company receives refusals from Russia’s Pension Fund to accept these documents, which is a direct violation of McDonald’s employees’ rights,” Izvestia quoted McDonald’s Russia Director for Public Relations Svetlana Poliakova as saying.

But the Russia Pension Fund says McDonald’s submitted documents with too many errors, including misspelled names and incorrect wages. From RIA Novosti:

Poliakova argued that the company submits the documentation to the Pension Fund in accordance with all the requirements.

However, Russia’s Pension Fund representatives explained that the responsibility for McDonald’s employees’ rights violations lies within the company itself, as the majority of submitted documents contained mistakes, including in the names of employees, and the sums of their wages, Izvestia reported.

According to Russia’s Pension Fund, in 2013 the number of mistakes in the documents reached its maximum. The Pension Fund argues that it has repeatedly called on McDonald’s managers to correct the mistakes and resubmit the papers, but the company ignored its all requests. So, the accounts on the basis of which the pension rights are formed, were not ready.

There are currently over 400 McDonald’s restaurants operating in Russia.

Photo by Roadsidepictures via Flickr CC

Alaska Fund Sues 13 Banks Over Rate Manipulation

The Alaska Electrical Pension Fund filed lawsuits yesterday against 13 banks across the world for alleged rate manipulation. The banks include Bank of America, Citigroup and Goldman Sachs. More from Chief Investment Officer:

The Alaskan fund filed a complaint to the Manhattan Federal Court on Thursday, claiming the banks ran a “secret conspiracy” to set the ISDAfix rate at artificial levels from 2009 to 2012, Bloomberg reported. This action caused billions of dollars of investor losses, the fund claimed.

The ISDAfix is used to set rates for interest rate derivatives and other financial instruments.

The pension fund accused the banks of executing rapid trades just before the rate was set, an action referred to as “banging the close”. This caused brokerage firm ICAP, which was also cited in the filing, to delay processing trades until the banks moved the rate where they wanted, meaning it did not necessarily reflect market activity.

All of the defendants either declined to comment or did not respond to Bloomberg’s calls, the newswire said.

From the fund’s court filing:

“This could not have happened without some form of advanced coordination…even if reporting banks always responded similarly to market conditions, the odds against contributors unilaterally submitting the exact same quotes down to the thousandth of a basis point are astronomical. Yet, this happened almost every single day between at least 2009 and December 2012.”

Urban Institute Rates Pennsylvania PERS Among Worst In Nation At Covering New Hires

The Urban Institute released a report Thursday studying the pension benefits paid by Pennsylvania’s State Employees Retirement System.

The authors rated the System as the third worst in the country in terms of covering new state employees. From the report:

Pennsylvania’s pension plan for state employees receives a failing grade in the Urban Institute’s state and local pension plan report card, and ranks as the third-worst plan in the nation covering newly hired general state employees. The plan scores poorly because it is inadequately funded, it penalizes work at older ages by reducing lifetime benefits for older employees, and it provides few retirement benefits to short-term employees. Age-25 hires must work 32 years before they accumulate rights to future pension benefits worth more than their required plan contributions. Various pension reforms could distribute benefits more equitably across the workforce.

More details on the report’s findings, as reported by TribLive:

The study, published Thursday, said SERs, the state employee retirement system fund that serves about 120,000 retirees and 105,000 state workers, has an $18 billion shortfall and deficits that result in dramatic inequities in pension benefits.

The plan ties benefits to years of service. Researchers found 76 percent of all state-financed pension benefits go to the 25 percent of employees with the largest pensions, and the top 5 percent of recipients receive 22 percent of all benefits.

Those who leave after five years, the minimum time to vest in the system, fared poorly.

Only Massachusetts and New Jersey scored worse than Pennsylvania in terms of covering new state employees, said economist Richard W. Johnson, a senior fellow with the Washington-based Urban Institute and lead author of the study.

Read the full report here.

Michigan Gov. Snyder Defends Pension Tax

Michigan Gov. Rick Snyder’s tax on pension benefits, levied in 2011, has become a legitimate campaign issue over the last few days. Snyder took to the radio this morning to defend the policy and cast the tax in a different light. Reported by Detroit News:

Democrats have made Snyder’s changes to the way pensions are taxed a major issue in the election campaign, calling it a tax on seniors — a characterization the governor challenged Friday during the live radio show.

“That’s a misstatement when it says seniors,” Snyder told radio show host Rick Pluta. “It was really about essentially removing the exclusion on pension income.”

In 2011, Snyder first proposed ending all income tax exemptions on pension income. Previously, only retirees with large pensions from private employers were subject to the income tax.

[…]

The governor noted a new exemption of up to $40,000 was carved into the tax code for all forms of income for senior citizens.

“Now it’s fair between people who had retirement income and people who had working income,” Snyder said.

Under the changes Snyder signed into law, all pension income is subject to the 4.25 percent income tax for residents born after 1952.

“It’s still one of the top 10 most generous schemes in the country,” Snyder said of Michigan’s tax on retirement income.

Snyder reiterated his longstanding argument that making more pension income subject to the income tax was a matter of fairness to other workers.

“If you say retirement income isn’t taxed, you’re shifting your taxes to your kids to say ‘we want you to carry us,’ and that’s not a fair answer,” Snyder said.

The pension tax is especially controversial because Snyder simultaneously cut taxes for businesses by $1.8 billion.

Snyder countered that, although he cut taxes for businesses, he also “wiped out” tax credits for those businesses.

Someone Is Stealing The Campaign Signs Of CalPERS Board Candidates

Two candidates running for a spot on CalPERS’ board—David Miller and Theresa Taylor—have noticed one similarity in their campaigns: their signs are disappearing. From the Sacramento Bee’s State Worker blog:

In an email to The State Worker, Taylor suggested that Miller’s signs may have been taken down by CalPERS for violating election rules. And she forwarded a cordial email exchange between her campaign consultant and Miller about vanishing signs on both sides:

“… Just a friendly heads up that there seem to be some campaign sign thieves operating in the downtown area,” Miller wrote in a Wednesday email that Taylor forwarded to The State Worker. “Quite a few of my campaign signs have disappeared over the last few days and my campaign workers confronted a couple of the sign thieves just today while working for me downtown. It doesn’t appear that your signs have been targeted but I thought I would let you know so your folks can keep a lookout as well.”

Taylor consultant Scott Adams replied to Miller’s email: “… We too are experiencing our signs disappearing from posted locations. Unlike your guys, we have not spotted any sign thievery in progress. We just started noticing the removal of our signs so it appears to be a recent development. I can’t imagine anyone wanting to collect these as souvenirs – but you never know. Thanks for the note. I will pass it on to Theresa.”

On Friday, Miller said that he doesn’t believe Taylor’s campaign is responsible for the thefts.

“I think it most likely that some overzealous supporters took it upon themselves,” Miller said, “to help their candidate by removing my signs.”

Taylor suggested that some of Miller’s signs could have been removed by none other than CalPERS. The fund might have taken down the signs if they were placed on the fund’s property, which violates election guidelines.

Photo by Dvortygirl via Flickr CC License

VIDEO: Pennsylvania Lawmaker Pushes For Hybrid Pension Plan

Republican Rep. Mike Tobash has taken to YouTube to promote his plan for a hybrid pension system in Pennsylvania.

The plan was introduced July 2 as House Bill 1353.

The group Pennsylvania Needs Pension Reform, which supports the plan and also hosts the above video on its YouTube account, provided a summary of the benefits on its website:

What the Plan Does
1. Shifts risk.
Under this plan, the future pension investment risk facing the state, school districts, and taxpayers will shift to members of the retirement plans as hybrid tier participation grows. The Commonwealth and its taxpayers would be more sheltered from risk, irrespective of market performance.
2. Delivers competitive benefits.
This plan provides new employees with retirement benefits that are every bit as competitive and desirable as those they would receive in the private sector.
3. Protects earned benefits.
The plan proactively works to protect the benefits that hard-working Pennsylvanians have already earned. Under this plan, no current employee or retiree would see any changes to his or her plan.
4. Demonstrates responsible spending.
This is the fiscally responsible thing to do; not a “quick fix” like we have seen in the past. We would be making a fundamental change to ensure we can responsibly meet our statutory obligation to the retirement systems moving forward.
5. Stops the bleeding.
The projected debt associated with our current pension systems is expected to be eliminated by fiscal year 2044 as we meet our annual payment obligations. We can eliminate the unfunded liability years sooner by putting savings back into the systems.
6. Safeguards Pennsylvania’s credit rating.
The Commonwealth’s credit rating has already suffered from the pension crisis. Our approach protects taxpayer money by helping to avoid inflated interest rates on our credit.

New Jersey Lawmaker Puts New Pension Proposal On Table

Chris Christie’s pension commission members aren’t the only ones brainstorming pension reforms in New Jersey lately. A Democratic assemblyman has proposed a plan that would shift new hires into a hybrid plan with some attributes of defined-contribution plans and some attributes of defined-benefit. Reported by The Star-Ledger:

Assemblyman Troy Singleton (D-Burlington) last week sent some public union leaders a draft of a bill he’s considering introducing that would keep the current pension system in place for those already enrolled in it, but shift new public workers to a “collective defined contribution retirement program” – a sort of mix between a traditional pension plan and a 401(k).

“It may be something we don’t introduce, but it may be something we do in a different form. But I’d like to start some dialogue in where our pension system goes in the next step for our pension system,” Singleton said in a phone interview “The only thing I would tell you is it’s still a work in progress.”

The idea did not get a warm reception from the public worker labor unions, even though Singleton himself comes from the private side of organized labor, as an official in the Northeast Regional Council of Carpenters.

And Singleton acknowledged that the plan would not do anything to solve the pension’s unfunded liability of about $40 billion, which he said must be dealt with through increased state payments.

Singleton provided the Star-Ledger with an outline of how the plan would function. The gist:

Workers would establish accounts that both they and their employers would pay into, though the workers would pay three times as much as the employer. The money would be managed by a “professional money management provider” that could charge fees of no more than 0.25 percent of the total, while the plan’s appointed board and the State Investment Council would determine where the money would be invested.

The investment returns would be annually credited to the retirement accounts. But if the return is greater than 8 percent, the excess would go into a reserve fund, which would later be used if the investments lost money. The plan would allow for “bonus” payments to the retirement accounts if the reserve fund is healthy enough.

It’s far from the current pension system, in which workers’ final retirement payments stay the same, no matter how good or bad the funds’ investments are doing.

Christie appointed a commission last month to examine the state’s pension system and propose reform ideas. The commission’s final report will come in the next few months.

CalPERS, Harvard Money Linked To Caribbean Pay Day Loan Venture

A unique series of events exposed this week a controversial investment made by a handful of institutional investors.

Institutional investors such as Harvard and CalPERS invested a combined $1.2 billion with a private equity fund, Vector Capital IV LP. But Vector soon tried investors’ patience, as it was slow to invest that money.

Eventually, some investors threatened to pull out altogether—which led Vector to make the quick decision to invest in Cane Bay Partners VI LLLP, a company that ran numerous pay day loan sites in the Caribbean and charged up to 600 percent interest for a loan. From Bloomberg:

By 2012, investors including Harvard University were upset that about half the money [invested with Vector] hadn’t been used, according to three people with direct knowledge of the situation.

Three Americans on the Caribbean island of St. Croix presented a solution. They had built a network of payday lending websites, using corporations set up in Belize and the Virgin Islands that obscured their involvement and circumvented U.S. usury laws, according to four former employees of their company, Cane Bay Partners VI. The sites Cane Bay runs make millions of dollars a month in small loans to desperate people, charging more than 600% interest a year, said the ex-employees, who asked not to be identified for fear of retaliation.

Mr. Slusky’s fund, Vector Capital IV, bought into Cane Bay a year and a half ago, according to three people who used to work at Vector Capital and the former Cane Bay employees. One ex-Vector employee said the private equity firm didn’t tell investors the company is in the payday lending business, for which borrowers repay loans out of their next paychecks.

Pay day loans are controversial because they charge high interest rates on loans given to people who are usually in a financial bind to begin with.

Many states in the US have banned the practice, which has forced the businesses to go online.

For now, Cane Bay Partners claims it is only a “management-consulting and analytics company”.

Photo by www.panamacity-hotels.travel

Illinois Workers Opt Into 401(k)-Style Plans In Record Numbers

SURS members chart — CREDIT: Illinois Policy

All around the country, employers are funneling new hires into 401(k)-type retirement plans instead of traditional pension schemes.

But the members of one Illinois fund are given the choice of participating in a defined-benefit or defined-contribution plan–and more than ever, they’re choosing 401(k)s. From Illinois Policy:

Today, more than 13 percent of all active employees in the State Universities Retirement System, or SURS, participate in a 401(k)-style plan instead of a traditional pension plan run by the state. These state-university workers control their own retirement accounts and aren’t part of Illinois’ increasingly insolvent pension system.

And recent data from SURS obtained through a Freedom of Information Act request shows the popularity of 401(k)-style plans is growing.

Nearly 20 percent of all SURS employees eligible for a retirement plan in 2014 have chosen a self-managed plan over the traditional pension scheme. Just a few years after the Great Recession, the number of SURS members choosing self-managed plans has reached an all-time high.

In 1998, SURS began allowing its new workers to opt into self-managed retirement plans. In these plans, an employee contributes 8 percent of his or her salary toward retirement savings and the employer puts in a matching 7 percent. That means the employee has the equivalent of 15 percent of each paycheck put into an account that’s entirely theirs.

As for why employees are opting into 401(k)s over traditional pensions? The growing concern over the health of Illinois’ pension funds probably plays a big role. Strong stock market gains over the last few years likely play a part, as well.

Judgement Due in Court Battle Waged By Workers Excluded From Pension System Because of Medical Issues

A five-year long court fight continues to play out in Jacksonville, and chances are good this lawsuit will continue to stretch on even after an initial judgement is filed.

City employees filed the class-action lawsuit after Jacksonville barred many workers with medical issues from entering the pension system. The workers say the city violated the Americans with Disabilities Act. From the Florida Times-Union:

The suit involves about 1,400 employees, and at one point their lawyers said the case might affect up to $500 million of pension payments, spread over 30 years. But there are too many details unanswered still for either side to talk about a price tag yet.

The employees bringing the suit argue the city violated ADA rules by requiring new workers to be screened for health problems such as diabetes and heart disease before they could enroll in the city’s pension system. People with medical issues could be blocked from enrolling in the pension and would instead pay into Social Security, or they could sign a waiver that disqualified them from getting any death or disability benefits based on their particular issue.

“The sole purpose of the examination was to address the terms under which an employee would be admitted to the pension plans, if admitted at all,” reads the judgment drafted by the plaintiffs.

The city changed its rules in 2010 to allow employees to buy pension coverage they couldn’t get earlier, but the suit is about what expenses the city should cover.

The city has argued that it has no liability in the case; if the judge rules on the side of the city, the case will wind down quickly.

But if the ruling falls on the side of employees, more court battles loom. Among them: how much does the city owe? Once that number is determined, the court will need to decide how to divvy up the damages amongst the employees.

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