Moore: State Should Rescue St. Joseph’s Pensioners
Monday, August 21, 2017
These people have made their retirement plans based on the reasonable assumption that their employer would keep their word and make sure that their retirement fund was secure and safe.
Now, according to Steven Del Sesto, the court appointed receiver for the bankruptcy, those retirees could see a 40 percent reduction in their expected retirement benefits--through absolutely no fault of their own. That means the pensioners would receive just 60 percent of what they were planning on receiving.
There are many questions surrounding this story that will need to be answered moving forward. But one thing is certain, the workers who are expecting pensions aren’t to blame in this situation, and they shouldn’t be hung out to dry.
The first question is why the sale of St Joseph's to CharterCARE in 2014 was approved. At the time, Attorney General Peter Kilmartin approved the plan contingent that CharterCARE make a $14 million contribution to the pension fund to bring the fund from 90 percent to fully funded.
Called To Account
Yet just three years later, the pension fund is insolvent and in receivership--despite the fact that the stock market has boomed over that time period. Clearly, something just doesn’t add up. Obviously, there needs to be a forensic audit of the pension system to explain why the numbers ceased to add up and so quickly. Was there a drastic accounting error that took place?
The fund currently has somewhere between $80-90 million, but a shortfall of $43 million. It doesn’t take a pension expert to see that that’s a big problem.
The Roman Catholic Diocese of Providence, which managed the fund before the sale, needs to explain what happened to the fund and why it’s been reduced so quickly. CharterCARE also needs to explain what has happened.
We should expect more questions to develop as more of the answers begin to trickle in.
The whole situation begs the question as to whether or not large institutions should be trusted, or even allowed to manage the retirement plans of individuals.
It's Only Fair
How could anyone forget the Central Falls receivership that began in 2010? In that instance, pensioners were slated to receive cuts of roughly 55 percent of their expected benefits. The state stepped up and did the right thing--it kicked in money to allow pensioners to receive 75 percent of what they were expecting.
That’s not ideal by any stretch of the imagination, but it does help. Given that the Central Falls pensioners were aided by state taxpayers and saw their pensions increased up to the 75 percent mark it’s only fair and logical that the state should also help the St. Joseph’s pension beneficiaries also retire with some level of dignity.
When size of the benefit cut is finalized, it seems incumbent on the state to come forward and, to some extent, lessen the blunt of these pension cuts to these individuals similar to the way it did for the Central Falls employees. If the final reduction brings the pensioners benefits to less than 75 percent of what they were expecting, the state should make up the difference.
It’s only fair to help out these folks. We did the same for Central Falls retirees.
Related Slideshow: RI Pension System’s Highest Paid Investment Firms
Below are the highest paid investment firms by the state pension system. Two types are listed: hedge funds and private equity firms. Firms are listed in order of least to highest rate of pay. Firms at the same rate of pay are ordered according to the amount of the payment they received, from least to greatest. For each firm, the name, type, management and performance fee rates, and the amounts paid for each are shown, along with the total. In instances where a firm had more than one fund, information is provided for each individual fund. Data are from a newly published online report of investment expenses for the state pension system. Note that the Treasurer’s office has declined to disclose information for 18 private equity firms due to confidentiality clauses.
Third Point Qualified LP
Firm Type: Hedge Fund
Pension Assets Invested: $0 *
Management Fee Rate: 2.00%
Performance Fee Rate: 20%
Management Fees: $1,029,000
Performance Fees: $2,423,000
Total Investment Expense: $3,452,000
NOTE: Figures are end of year figures. The zero here means that money was invested earlier in the year but then withdrawn.
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