Administration March 8, 2006

"Secret" Settlement at IPERF Comes to Light

August 15, 2005 (PLANSPONSOR.com) - Indiana's Public Employees' Retirement Fund paid its former chief investment officer $212,000 to leave in a secret settlement brokered two years ago that has only just come to light.
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According to the online version of the Indianapolis Star, Patricia J. Gerrick, who was hired in 2001 and left in 2003, was in charge of investing the $10 billion IPERF.   The Star reports that Gerrick was fired in 2003 after a new executive director, Craig Hartzer, began bringing in his own team, but that she promptly filed a discrimination complaint with the federal Equal Employment Opportunity Commission.   The settlement allowed Gerrick to resign instead of being fired, handing her the severance package in question.   She eventually wound up in a similar position at North Carolina’s $60 billion fund (see  Tar Heel Fund Gets New CIO ).  

According to the Indy Star report, the Indiana settlement is becoming public now because the State Board of Accounts earlier this year took issue with the secrecy surrounding the payout in an audit of the pension fund.   The Indianapolis Star obtained a copy of the settlement after repeated requests under the state’s public records law.

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What’s at issue now is not the settlement itself, or the actions behind it, but the fact that auditors found that the fund violated state law by failing to ratify the settlement at a public meeting of the board of trustees.   When auditors noted the violation, the trustees at a February 2005 meeting, more than a year after the settlement was signed, approved a sweeping motion that ratified actions regarding “any and all litigation, proceedings, claims, and/or disputes.”

PERF Problems

The controversy is the latest in what has been a series of embarassments for IPERF, including the hiring of a chief benefits officer who was a convicted identity thief, temporary staff who stole money and Social Security numbers related to their employment at the fund (see  Audit Finds 23 ‘Significant’ Problems at PERF ), and a series of issues uncovered in the ensuing fund audits (see  Audit: Indiana Fund Still Beset With Problems ).  

Hartzer, whose actions triggered Gerrick’s departure, was brought on board by then-Governor Frank O’Bannon to address problems at the fund.   He resigned after the 2004 elections, and David Adams was appointed by now-Governor Mitch Daniels to replace Hartzer in March (see  Indiana Taps New Pension Fund Chief ).

Benefits March 7, 2006

Canadian Employers Feel the Health Care Burden Too

March 7, 2006 (PLANSPONSOR.com) - Just as rising health care costs and the impending wave of baby boomer retirees have caused US employers to initiate cost-cutting changes for retiree health care coverage, a Hewitt Associates survey found that Canadian employers are considering changes too.
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In a press release, Hewitt said its survey of 218 Canadian organizations reveals that only 4% say they plan to eliminate post-retirement health care benefits entirely. However, 57% say they intend to reduce the level of benefits over the next three years. Reasons cited for the change include the rising cost of health care (95%), accounting costs (67%), and the large number of employees planning to retire in the next decade (43%).

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In addition, 55% of Canadian companies absorb the additional costs created by cutbacks in provincial health care benefits, the release said. Only 25% of surveyed respondents said they plan to absorb future costs. Also in response to political changes, while 63% of companies have not decided how they would respond to making private health care available to Canadian employees, 59% of those who have decided say they do not intend to cover the costs of private health care under any circumstances.

Naveen Kapahi, a senior benefits consultant in Hewitt’s Vancouver office, said in the release, “Escalating health care costs, combined with the economic and political changes currently underway in Canada, will force many to actively look at strategies beyond traditional cost-shifting to manage rising health care costs.”

Strategies survey respondents said they plan to utilize include:

  • Stricter eligibility requirements– According to Hewitt’s survey, 14% plan to adopt stricter eligibility requirements for workers to qualify for retiree health care benefits. In 2004, one-third of organizations (34%) did not require a minimum number of years of service before employees qualified for post-retirement health care benefits. Today, 33% of companies responding to the survey require six to 10 years of service before employees are eligible for benefits, an increase of 7% since 2004.
  • Reductions in medical coverage –Eighteen percent of organizations said they plan to reduce medical coverage for their retirees in the next three years, including eliminating medical services, increasing deductibles/co-payments and capping certain healthcare services.
  • Increased cost- sharing – Approximately one in three (30%) companies said they plan to add or increase retiree contributions to their retiree health care programs.
  • Increased flexible retiree benefit plans– As a way to control costs, many companies are now offering flexible retiree benefit programs, which enable companies to control their future benefit spending by paying for benefits through a monetary allowance instead of funding the benefits directly. Sixteen percent of companies now offer flexible benefit programs to retirees, up from 8% in 2004.

Copies of the study, “Postretirement Health Care Benefits in Canada 2006,” can be obtained by calling 416-225-5001 or emailing infocan@hewitt.com .

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