Auditor General Eugene DePasquale Thursday said his performance audit of the Public School Employees’ Retirement System (PSERS) found the need for legislative reform and operational improvements that include drastically reducing the amount of investment fees paid.
The 151-page audit report, which covers July 1, 2013 to March 31, 2017, includes 17 findings on six issues and makes 37 recommendations — 26 directed at PSERS, 10 directed at the General Assembly and one for the governor’s Office of Administration.
“One of my most significant concerns from this audit is that PSERS doesn’t seem to think spending more than $416 million on investment management fees in 2016 is a big deal,” DePasquale said. “It is mind-numbing that they want a pat on the back for reducing the fees from $441 million in 2015.
“There should be a never-ending focus on driving the fees paid by PSERS to the absolute lowest level possible,” he said, noting, “Every investment fee dollar saved remains in the pension fund for the benefit of the retirees and the accrued savings of the taxpayers.”
The audit also highlights the need for both the Public School Employees’ Retirement Code and the Public Employee Pension Forfeiture Act to be legislatively broadened.
Additionally, auditors noted the need for PSERS to improve some of its internal operations in order to protect the long-term interests of the system’s members who consistently pay into the fund, school employers, and the taxpayers.
As with many public retirement systems, PSERS faces a large unfunded liability. In 2000 PSERS was overfunded by 24 percent and remained above 100 percent funded until 2003. As of June 30, 2016, PSERS was down to 57.3 percent funded with an unfunded liability of $43 billion; and assets of $49.2 billion invested.
“Pension reform has been discussed in Harrisburg for decades,” DePasquale said. “PSERS and the State Employees’ Retirement System, which I am also auditing, are the state’s two largest public pension plans and, collectively manage $78 billion worth of assets. My recommendations in this audit, and on SERS this summer, should help improve the operations of both systems and reduce the reliance on taxpayers.”