new york pensions | Pension360

New York Senator Explains Why He Chooses to “Double-Dip”

Pension360 yesterday covered the quirk in New York law that allows lawmakers to file for retirement, collect a pension, but stay in office and continue collecting their normal salary, as well.

Nine lawmakers filed for “retirement” this year. But on Tuesday, one of those lawmakers explained what his motivations were for taking advantage of the legal loophole.

New York State Sen. John DeFrancisco explains his motivations:

“A state statute that was enacted long before I was first elected to the Senate allows state employees who are 65 or older to retire and also earn an income in a state position. This applies to all state employees.

In the past, many state employees, including legislators, have retired and continued to work in state government. I was eligible to do so three years ago, but chose not to. This year, I decided to file for retirement.

If I did not file and died while in office, my wife of 46 years would not receive my valuable retirement that I have earned over the last 37 years. Instead, she would receive a modest lump sum benefit. The older I have gotten, the more I have come to understand that I cannot risk depriving my spouse of what she is entitled to, and what I have earned.

Granted, I could simply retire and not serve any longer. However, now that Republicans have regained control of the State Senate, Central New York would be better served by my returning to my Senate seat, as a majority member and Chairman of the Senate Finance Committee.

So in balancing these factors, I decided to file my retirement papers, effective January 1, 2015, and to continue to serve in the State Senate.”

New York Lawmakers “Retire”, Collect Pensions, But Don’t Leave Office

A quirk in New York state law allows certain lawmakers to “retire” without actually leaving office – letting them collect their pensions while still on the job and earning their normal salary.

From the New York Post:

A wacky loophole in state pension law allows legislators who are at least age 65 and elected before 1995 to retire for pension purposes.

In essence, the double dippers — many of whom make $100,000 or more between their base legislative salary of $79,500 and leadership stipends — will be giving themselves pay hikes of 30 percent to 100 percent, depending on years of service.

The legislators re-elected last month who filed for retirement with the state comptroller’s office are a bipartisan bunch.

They include five Republican senators — John DeFrancisco of Syracuse; John Bonacic of Orange County; Kemp Hannon of Nassau County; Kenneth LaValle of Suffolk County; and Tim Libous of Binghamton.

In the Assembly, three Democrats and one Republican filed for the added benefit — Jeff Aubry (D-Queens); Gary Pretlow (D-Mount Vernon); William Magee (D-Madison County); and David McDonough (R-Nassau).

“It’s a loophole that shouldn’t exist. But as long as this is the law, people are going to exploit it,” said Assemblyman Michael Fitzpatrick (R-Suffolk).

Fitpatrick has introduced legislation that would require elected officials and government workers to enter a 401(k)-style pension system.

E.J. McMahon of the Empire Center agreed. “If legislators were in a 401(k)-type system, like the vast majority of their constituents, this simply wouldn’t be an issue. The existing system shouldn’t simply be mended, it should be ended.”

The lawmakers defended their actions. They told the NY Post:

“I had a heart attack 10 years ago,” said Aubry, 67, first elected in 1992. “Everyone has to look at their own situation. I don’t know if this makes a huge difference to people in my district.”

Aubry, who makes about $100,000, expects a monthly pension of about $2,400 or close to $30,000 extra a year.

Bonacic, 72, told The Post his wife would collect lower benefits if he dies in office without being retired.

“If I were to die while in active service in the state Legislature, the law does not allow my wife to collect my pension. I put this decision off for as long as I can, but I thought it was appropriate at this time to protect my wife,” he said.

Pretlow, 65, said he was thinking of his own mortality.

“I’ve been to six funerals in the past two weeks, 28 to 55 years old. No one was older than me. Life is short,” he said.

In total, nine state lawmakers will be “retiring” this year without leaving their job.

Photo by Tim (Timothy) Pearce via Flickr CC License

New York Comptroller Candidates Spar Over Private Equity Pension Investments

In the race for New York State Comptroller, incumbent Thomas DiNapoli is guarding a comfortable 20-point lead in the polls.

But his challenger, political unknown Bob Antonacci, isn’t holstering his guns quite yet.

Both candidates over the weekend sparred about the place of private equity in New York’s pension portfolio.

Under DiNapoli, New York’s Common Retirement Fund (CRF) allocates 8 percent of assets to private equity. Antonacci thinks that’s far too much.

From the New York Post:

DiNapoli’s challenger in the state comptroller’s race warned that private-equity investments look good now, but can turn bad very quickly.

“Private-equity investments can be very risky,” says Republican Bob Antonacci.

He agrees that it is a good idea to diversify state retirement portfolios beyond stocks and bonds. But 8 percent in private equity is excessive, he says.

“I think the problem is that he (DiNapoli) is putting too much emphasis on risky investments,” Antonacci said.

He added that the comptroller is seeking out chancier investments because his goal is to obtain a 7.5 percent return a year. That, Antonacci adds, is an unrealistic expectation.

“We are taking chances on getting returns that aren’t going to be there in the long run,” Antonacci says.

DiNapoli’s office responded:

“The comptroller sees private equity as diversifying the investment portfolio and getting better investment returns,” says DiNapoli spokesman Matthew Sweeney.

[…]

The recent numbers show that using private equity reduces risk through portfolio diversification, DiNapoli’s spokesman said. That, he adds, reduces risk.

New York State and Local Retirement Systems earned 14.9 percent over the past decade on the private equity part of the investments, according to a new report from the Private Equity Growth Capital Council (PEGCC).

The State Comptroller oversees $181 billion in pension assets. Recent polls have DiNapoli leading Antonacci, 58 percent to 31 percent.

Photo by Awhill34 via Wikimedia Commons

New York Comptroller Candidates Square Off on Pensions

The New York State Comptroller serves as the sole trustee of New York’s $176.8 billion retirement system. So it’s not surprising that pensions were among the first issues broached during Wednesday night’s televised debate between the two candidates for Comptroller, incumbent Thomas DiNapoli (D) and newcomer Robert Antonacci (R).

Antonacci voiced several of his gripes with the state’s pension system; he claimed the assumed rate of return was too high and that the system should take on more characteristics of a 401(k)-style plan. From the Democrat and Chronicle:

Antonacci, who since 2007 has served as Onondaga County comptroller, took several opportunities to criticize DiNapoli’s oversight of the system. The pension fund’s assumed rate of return of 7.5 percent, Antonacci said, was too high.

A certified public accountant, Antonacci also said he believes the state should move toward offering defined-contribution retirement plans — what many would think of as a 401k-style plan. State and local-government employees currently receive defined-benefit plans, in which the payout at the time of retirement is determined by a formula and not subject to the whims of the stock market.

“We have to make some fundamental changes to the pension fund, including talking about a defined-contribution plan,” Antonacci said.

DiNapoli disagreed, saying a move to a 401k-style system would hurt working New Yorkers. He touted the performance of the pension fund — which is consistently ranked as one of the best-funded public plans in the country — while acknowledging his office may decide to lower the assumed rate of return in the future.

“Moving to defined contribution would put more and more New Yorkers at risk of not having adequate income in their golden years,” DiNapoli said. “That would be a bad choice for New Yorkers.”

DiNapoli is leading in the polls by 28 percent.

Photo by Awhill34 via Wikimedia Commons

New York’s Sole Pension Trustee Faces New Competition In Election

Two-term New York Comptroller Thomas DiNapoli is the sole trustee of New York’s largest pension funds, but he’s now facing competition from an unlikely source: a local auditor named Robert Antonacci who claims he is more qualified than DiNapoli.

From The Associated Press:

Democratic New York Comptroller Thomas DiNapoli, chief financial officer for the state, faces an election challenge from a little-known accountant and lawyer who does similar work for Onondaga County and says he’s more qualified.

Robert Antonacci said the power of the checkbook is the key to whether state programs — such as economic development projects — are delivering. The 49-year-old Republican also said that following the flow of money through politics is how you clean up corruption.

“You can really get into the engine of government from the experience I have,” Antonacci said. “We’re going to look at everything in terms of what makes New York state tick.”

State economic development efforts, seeding proposed business expansions with tax breaks, funding or other support in return for promised jobs, will be a big initiative if he’s elected, Antonacci said. The Cuomo administration’s Start-Up New York program is one place the comptroller should be looking and verifying data, he said.

“We’re going to start with the governor and the Legislature, not the village of Podunk,” he said, referring to the mission of the comptroller’s office to audit government entities small and large.

[…]

“When you talk about getting at the underbelly of how governments run, as a CPA I have 30 years of experience of understanding how business operates,” he said. “The data is the key, and when you’ve got a CPA looking at a financial statement it’s a lot different than somebody who doesn’t have that experience.”

Both candidates have addressed the state’s pension system, as managing the fund’s investments is a large part of the comptrollers job. From AP:

[DiNapoli’s] stewardship has helped New York’s pension fund for public workers rebound from the 2008 national recession and grow to a record $181 billion, with state and municipal contribution rates declining for 2015 and 2016, he said.

[…]

As for the state’s $180 billion pension fund, Antonacci said his goal will be maximizing the return to taxpayers and not shareholder activism.

DiNapoli, as the pension fund’s sole shareholder, has sponsored shareholder resolutions at large corporations calling for more complete disclosures of their political activities, environmental practices and workplace standards at the overseas factories of suppliers. DiNapoli said those measures help protect shareholders, their investments and the companies from potential risks.

The election will be held Nov. 4.

Photo by Awhill34 via Wikimedia Commons

NYU President Speaks About $800,000 Pension

New York University President John Sexton has been a polarizing figure the last few years, not only for the large exit bonuses he approved for outgoing staff but also for his own $800,000 pension.

He addressed his pension at a dinner and question-and-answer session last week with NYU students. On his pension, from NYU Local:

“After taxes, that’ll provide 400,000 dollars a year, which is a good income. I have about fifteen to twenty people that are depending upon me. And my one indulgence—you’ll notice if you look carefully that I don’t own a suit, and I wear TravelSmith or expandable waist pants—the one thing I do is try to travel to places and to try to extend that to not only my family but to others, and I’d like to have the latitude to do that. That doesn’t mean I will do it. It doesn’t prevent me from donating some of that salary.”

“It’s because I don’t have a savings account that I do need that money.”

“I’ve never asked for a particular salary.”

And on his retirement plans:

“Gordon [Brown] is the UN High Commissioner for Education. He’s spending his life, and he wants me to spend my life other than my teaching, trying to get education to the abjectly poor: slums of India, Haiti, sub-Saharan Africa. I think that’s probably what I’m gonna do.”

“I do these periodic reflections. I’ve done about eight or ten of them. They’re on my website. The one I’ve been working on [recently] is how you could create a system in the United States that found the most talented students, matched them with the right school, and made it possible for them to go there.”

The rest of the questions didn’t have anything to do with pensions or retirement, but his answers are worth reading nonetheless. Check out the story here.

New York Common Fund’s Hedge Fund Target Is “Under Review”

New York’s Common Retirement Fund says it is “reviewing” its hedge fund investments, including the allocation targets for such investments as set in its investment policy.

The Common Fund makes investments for the New York State and Local Retirement System (NYSLRS) as well as other systems. Pension360 previously covered the fund’s investment policy, which allows for higher allocations towards hedge funds.

Now, the Common Fund is reviewing those allocations. From Business Insider:

“We are currently reviewing our asset allocations with the goal of maximizing our risk-adjusted return on investments,” a spokesman for state Comptroller Tom DiNapoli told Business Insider on Tuesday.

[DiNapoli] stressed that only a small amount of their investments are tied up in hedge funds, however — only about 3.2% or $5.6 billion for the DiNapoli’s fund, for example.

“The target allocation, which is currently under review, was set at 4% in 2009,” DiNapoli’s office added. If he decides to maintain that target, he would actually have to move more money into hedge funds.

[…]

Scott Evans, the chief investment officer of New York City’s retirement system, said the Big Apple’s pension fund has no plans to divest from its investments in hedge funds. He pointed to the relatively small size of the city’s hedge fund investment in his explanation for why he had no plans to eliminate it.

“Hedge funds are an alternative asset class that can help improve the balance between risk and return. They are optional,” Evans said in a statement. “Two of our five systems have opted to pass on those allocations. The other three have allocated 4-5% of assets to hedge funds. We have no current plans to recommend changes to this program.”

A spokesman for the fund later clarified to Business Insider that the review was routine and scheduled, and not connected to CalPERS’ decision to end its hedge fund program.

Photo by: Christopher Chan via Flickr CC License

New York Retirement System Is Prepared To Increase Its Allocation to Hedge Funds, Alternatives

CalPERS is running away from hedge funds, but, as Pension360 has covered in the past, most pension funds aren’t following. In fact, some are running in the opposite direction.

Case in point: the New York State and Local Retirement System (NYSLRS). The fund hasn’t made any decisions yet, but it is open to the possibility of expanding its allocation in hedge funds and other complex investments. From Public Sector Inc:

A bill passed by the New York State Senate and Assembly at the end of their session in June would expand, to 30 percent from 25 percent, the share of pension fund investments that can be allocated in “baskets” of assets not otherwise specifically permitted by law. These include hedge funds and private equity funds, which involve more complex financial risks and are more difficult to value and monitor than traditional stocks and bonds. The change has been supported in the past by Comptroller Thomas DiNapoli, NYSLRS’ sole trustee, although the lobbying effort for the bill this year appears to have been spearheaded by the New York City pension funds.

The bigger-basket pension bill hasn’t yet been sent to Governor Andrew Cuomo for his signature. If his approval or veto message contains so much as a single sentence’s worth of substantive explanation, it will exceed the sum total of all public comment devoted to the subject by state lawmakers this year. (The issue has also gone virtually unnoticed by State Capitol news media.)

In fiscal 2007, when DiNapoli became comptroller, NYSLRS paid out $162 million of investment management fees, including $27 million for alternative investments. By fiscal 2013, the latest year for which data are available, investment fees had risen to $454 million, including $163 million in the “absolute return” category alone, which includes hedge funds.

The NYSLRS has ramped up its allocation towards alternative investments in recent years. It the fund’s official investment policy is any indication, it is planning on devoting an even higher percentage of its assets towards such investments. From Public Sector Inc:

Total NYSLRS assets in the alternative category came to 11.8 percent last year, including 3.2 percent invested in absolute return strategies. However, according to its annual report, the fund’s long-term goal is to increase its alternative allocation to 21 percent, including 10 percent in private equity and 4 percent in absolute return assets including hedge funds, plus 4 percent in the newer category of “opportunistic” investments and 3 percent in “real assets” including commodities, infrastructure and timberland meant to create “inflation hedging strategies,” the annual report said.

The pension funds also announced recently a partnership with Goldman Sachs. Sachs will receive $2 billion to manage.

Delving Deeper Into New York Fund’s Partnership With Goldman Sachs

New York State Comptroller Thomas P. DiNapoli announced yesterday that New York’s Common Retirement Fund (CRF) plans to give $2 billion to Goldman Sachs for investing in global stocks.

The partnership is the first of its kind of the CRF. Aaron Elstein, who runs the In The Markets blog, weighed in on the partnership in a column on Wednesday:

“This innovative partnership gives the New York State Common Retirement Fund full access to world-class global equity investment opportunities and the nimbleness to take advantage of them on a timely basis,” DiNapoli said.

The innovative thing is that the pension fund hasn’t hired Goldman before. As for “access to world-class global equity investment opportunities,” it seems worth noting that mutual funds bearing the Goldman Sachs name have collectively returned 12.43% over the past five years, according to Morningstar, which is average for their category. In 2010 and 2011 the funds underperformed their category and in 2012 and 2013 outperformed. This year, their total return of 4.7% is exactly in line with the category. Maybe the global equity investment opportunities from Goldman aren’t really the ones to which you’d want special access. (A spokesman for the comptroller’s office later said Goldman can’t pitch in-house funds to the pension fund.)

Certainly the New York state pension fund will be offered investments that Goldman doesn’t make available to mutual fund customers. We know that because the press release said the pension fund and Goldman “will initially focus on dynamic manager selection opportunities in global equities to enhance returns in the Fund’s equity portfolio.” That doesn’t sound like such a bargain, either.

“Dynamic manager selection opportunities” is gibberish that in its tortured way means Goldman will introduce the pension fund to money managers who aim to outperform the market.

Elstein goes on to dissect the rest of yesterday’s press release from DiNapoli and also touches on the drawbacks of actively managing investments. Read the whole column here.

New York Common Fund Gives $2 Billion to Goldman Sachs

The New York State Common Retirement Fund announced today it plans to give $2 billion to Goldman Sachs Asset Management to invest in global equities.

Reported by Bloomberg:

It’s the first time the $180.7 billion fund has formed such a partnership, Comptroller Thomas DiNapoli, the pension’s sole trustee, said today in a statement. In addition to investing the funds with equity managers, the unit of Goldman Sachs Group Inc. (GS) will also provide advice across the pension’s remaining $98 billion equity portfolio.

“Identifying new opportunities is key to the continued growth of the fund’s long-term value,” DiNapoli said. It will give the pension “full access to world-class global equity investment opportunities and the nimbleness to take advantage of them on a timely basis.”

New York joins public pension funds including New Jersey, New York City and the Teacher Retirement System of Texas in making big allocations of capital to investment managers that can be deployed more quickly and across different strategies. Such separately managed accounts offer cheaper fees and more control for investors, who in turn agree to commit large sums for a decade or more.

[…]

Timothy O’Neill and Eric Lane, global co-heads of the investment management division at Goldman Sachs, said the partnership is a “landmark assignment” for the firm.

“We are excited to provide customized access to our broad open-architecture platform, due diligence expertise and portfolio construction capabilities,” they said jointly in the e-mailed statement from DiNapoli.

Thomas DiNapoli is New York State’s Comptroller, but he is also the sole trustee of the New York State Common Retirement Fund.

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