Outcry From Pensions Over Delaware Court Ruling On Legal Fees


A recent ruling by the Delaware Supreme Court lets corporations shift their legal tab to investors.

Now, public pension and trade groups are speaking out against the ruling. Two trade groups representing public pension funds have contacted Delaware lawmakers over the last two weeks to lambast the ruling.

From Pensions & Investments:

A letter sent Wednesday to Delaware Gov. Jack Markell by the National Conference on Public Employee Retirement Systems and eight unions representing public- and private-sector workers warns that the decision “eviscerates investor rights” beyond the state’s borders.

The letter joins an earlier call Nov. 24 by the Council of Institutional Investors for Delaware lawmakers to restore investors’ legal rights that are now threatened by the decision in ATP Tour Inc. et al. vs. Deutscher Tennis Bund. While the court allowed a private corporation to amend its bylaws to make litigants personally liable for legal expenses, public company boards of directors have embraced the May 8 ruling. More than three dozen companies have unilaterally adopted similar or even more restrictive fee-shifting provisions, said CII, whose members represent $2 trillion in assets, including the $187.1 billion California State Teachers’ Retirement System, West Sacramento; New York City Police Pension Fund, New York City Fire Department Pension Fund and other funds in the $160 billion New York City Retirement Systems; and North Carolina Department of State Treasurer’s Office, which oversees the $88.4 billion North Carolina Retirement Systems, Raleigh.

Both groups are calling for the governor to take immediate action, including legislation to restrict or overturn the court’s decision and curb the adoption of fee-shifting bylaws by companies, many of which are incorporated in Delaware. Calls to the governor’s office were not returned by press time.

“Pension plans are among the largest and most active institutional investors. Approximately 70% of the typical public pension plan’s funding comes from investment returns. As shareholders, pension plans must ensure the integrity of their investments. But as fiduciaries, pension plans cannot expose their capital — and their beneficiaries — to unreasonable financial risk,” said the letter from NCPERS, which represents $3 trillion in pension assets. “No reasonable investor … would be willing to risk facing this type of uncontrollable financial exposure.”

More on the case – ATP Tour Inc. et al. vs. Deutscher Tennis Bund – can be read here.


Photo by Joe Gratz via Flickr CC License

Study: Public Pensions Gained Confidence in 2014

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A survey of 187 public pension plans across the U.S. and Canada suggests that funds are feeling more confident about their long-term sustainability and their “readiness to address future retirement issues.”

The survey, conducted by the National Conference on Public Employee Retirement Systems (NCPERS) and Cobalt Community Research, was released Monday.

The main findings of the survey:

– Confidence continues to grow about readiness to address future retirement trends and issues. Respondents’ overall confidence rating measured 7.9 on a 10-point scale, up from 7.8 in 2013 and 7.4 in 2011.

Funds experienced an increase in average funded level – 71.5 percent, up from 70.5 percent in 2013. Two factors contributed to the change: average one-year investment returns of 15 percent and lower amortization periods.

Funds continue to experience healthy investment returns: 14.5 percent for one-year investments (compared to 8.8 percent in 2013); 10.3 percent for three-year investments (up from 10.0 percent last year); 9.8 percent for five-year investments (up from 2.7 percent last year); 7.8 percent for 10-year investments (up from 7.0 percent), and 8.1 percent for 20-year investments (virtually unchanged from last year’s 8.2 percent). Funds continue to work toward offsetting sharp losses from the Great Recession in 2008 and 2009 by strengthening investment discipline. Signs point to long-term improvement in public retirement systems’ funded status.

– Public funds continue to be the most cost effective mechanism for retirement saving. The total average cost of administering funds and paying investment managers was 61 basis points. According to the Investment Company Institute’s 2014 Investment Company Fact Book, the expenses of most equity funds average 74 basis points and hybrid funds average 80 basis points.

Funds continue to tighten benefits, assumptions and governance practices. Examples include a continued trend toward increasing member contribution rates, lowering inflation assumptions, shortening amortization periods, holding actuarial assumed rates of return and lowering the number of retirees receiving health care benefits.

– Income used to fund public pension programs came from member contributions (8 percent); employer (government) contributions (19 percent) and investment returns (73 percent).

The full summary of the study, including comments by NCPERS’ Executive Director, can be found here.

Video: Challenges Facing Public Pensions

The 2014 CSG National Conference was held last month, but videos of the presentations have just begun to surface in the past few weeks.

This presentation touches on the history of public pension plans in the United States, the challenges those plans face today, and the retirement “insecurity” faced by private sector workers.

The talk, titled “Public Pensions”, was given by Hank Kim, executive director and counsel for the National Conference on Public Employee Retirement Systems. His bio:

Hank Kim is executive director and counsel for the National Conference on Public Employee Retirement Systems, the largest public pension trade association in the United States. His responsibilities include strategic planning for NCPERS, promoting retirement security for all workers through access to defined benefit pension plans, and the expansion of NCPERS’ role in the continuing debate on health care.