Benefits July 10, 2006

Proposal Would Create CalPERS Retiree Health Care Liabilities Fund

July 10, 2006 (PLANSPONSOR.com) - Facing a new accounting standard governing the booking of their retiree health care liabilities, the nation's largest public pension plan proposed a new investment fund into which governments would invest dollars to cover those benefit costs.
Reported by

Coupled with about $205 billion in pension assets that the California Public Employees’ Retirement System (CalPERS) already manages, the new fund would give it even more clout on Wall Street and financial markets worldwide, the Sacramento Bee reported.

Get more!  Sign up for PLANSPONSOR newsletters.

Beginning in 2008, the Government Accounting Standards Board’s Statement 45 will require large governments to apply the same accounting standards used for pension liabilities to payments and services provided for retirees other than pensions (See GASB Issues New Standards for Post-Retirement Benefits ). Under the GASB rule, officials must book the long-term cost of employee health retirement benefits on their balance sheets and disclose the amount needed each year to fund the entire obligation.

According to the Bee report, the California State Association of Counties and League of California Cities are lobbying for the CalPERS bill, Senate Bill 1729, by state Senator Nell Soto. The measure is scheduled for an August 9 hearing in the Assembly Appropriations Committee.

The expectation is that even though government agencies won’t be required to set aside assets to pay the retiree benefit liabilities, many will want to pay that expense for fear that it would otherwise not look good to their credit rating agencies, the Bee said.

The CalPERS bill allows any public agency, from large counties to small fire districts, to invest money in a plan the fund administers. CalPERS trustees are weighing the issue and considering options ranging from providing actuarial consulting to creating a dedicated retiree health benefits investment fund. Increasingly, public agencies have urged CalPERS officials to set up a full-service program.

Advocates say it would be a natural fit for CalPERS, which administers pension benefits for the state and 1,142 public agencies, including 29 counties and 304 cities. It also is the nation’s third-largest purchaser of health care, buying more than $4 billion in coverage a year for 1.2 million state and local government workers.

Ohio’s government is one of a few that have built up a sizable fund. With current state employees contributing 4% of their salary, the Ohio Public Employees Retirement System has amassed about $12 billion in a retiree health trust.

Administration July 9, 2006

GAO Reports on "Significant" Oversight Challenges for SEC

September 19, 2005 (PLANSPONSOR.com) - In its recently issued report, the Government Accountability Office (GAO) found that the Securities and Exchange Commission (SEC) has made changes to strengthen its examination processes, but still faces challenges in overseeing the fund industry.
Reported by

The GAO gathered its information at Congress’ request after the mutual fund industry was plagued by scandals involving market-timing and late trading violations.

In its report, the GAO says that, in light of the fund scandals, the SEC determined that its practice of conducting routine examinations of all funds on a regular schedule is not the best means for identifying problems.   The SEC has changed its practices to examine only funds deemed at high risk on a regular schedule, and also is forming teams to monitor some of the largest groups of advisers and funds.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

The GAO believes the tradeoff of these revisions will be to limit the SEC’s capacity to examine funds considered a lower risk within a 10 year period, and to limit its capacity to accurately identify which funds are higher risk and target those funds for examination.

The report also said that the SEC’s recent rule requiring hedge fund advisers to register with them will further tax the commission’s resources and increase its exam workload.

While the SEC has integrated some quality controls into its routine exams, the GAO points out certain improvements that can be made to the quality control processes.   They suggest the SEC require supervisors to review the exams and document their review.   They also suggest the SEC examiners prepare written exam plans to use as a guide for the exam and as a check to make sure the exam included everything intended.

Finally, the GAO reports that the SEC’s oversight exams of Self-Regulatory Organization’s (SRO’s) broker-dealer exams provide limited information for helping SRO’s improve their exams and creates duplicate costs for firms.   This is due to the fact that the SEC and SRO conduct their exams with different guidelines and over different periods.   The GAO also said the SEC can not readily determine the extent to which its oversight exams assess mutual fund sales practices since it has not developed an automated system to track the full scope of its oversight exams.

The GAO report is  here .

«