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Benefits July 13, 2007
Nebraska Public Fund Hit by Recordkeeping Woes
July 13, 2007 (PLANSPONSOR.com) - A study by
Nebraska state auditor Mike Foley found that more than 4% of
the retirement plan and deferred compensation accounts for
public employees had accounting problems after an apparent
botched recordkeeping transition.
Reported by Fred Schneyer
According to a news report in the Lincoln Journal Star, the report documented instances of accounts with errors that ranged from an understatement of $4,111 to an overstatement of $4,407. Many of the recordkeeping problems amounted to less than $100 per account, the report said.
The Nebraska Public Employees Retirement System is
responsible for maintaining about 30,000 accounts for
state and county employees.
“A 96% error-free rate might be terrific for a high
school algebra student, but in the financial world, an
error rate in excess of 4% on accounts with over $1.5
billion in net assets cannot be tolerated,” Foley told
the newspaper.
The news report said some accounting problems occurred
last summer when the agency changed from Ameritas’
recordkeeping service to Union Bank and Trust. Foley
found that communication problems may have played a part
as well as apparent confusion by state agency officials
over Union Bank’s recordkeeping platform.
Because of the accounting issues, the agency ultimately
got Union Bank to voluntarily withdraw from its contract
with the state, said Denis Blank, Nebraska Public
Employees Retirement Board chairman, according to the
newspaper. The state returned the recordkeeping business
to Ameritas.
Going back to Ameritas cost about $185,000 in a
reconciliation fee, the newspaper said. The fee was
spread over plan participants’ accounts, and is costing
each one 60-cents a month.
Foley found that significant account errors were more
likely for participants who transferred money between
investment options or took distributions between July and
September 2006. Of the accounts auditors tested where
participants had transferred money, Foley’s office found
nearly three-quarters (72%) had errors. The errors ranged
from understatements of $2,128 to overstatements of
$4,407.
The retirement system has sent letters to participants
with information, statements and a form to fill out if
they find a problem with their account. Participants were
first told about potential problems in October.
The problems do not affect retirement plans for schools,
judges and the Nebraska State Patrol, according to the
news story.
Foley’s report is here .