WORCESTER — City Auditor James A. DelSignore is raising red flags about the state’s pension reform law, claiming it has “stymied” the Worcester Retirement Board from being able to invest pension funds with companies it wants to do business with.
Mr. DelSignore, who also serves as chairman of the Worcester Retirement Board, contends the law, which was approved by the Legislature last year, could have significant ramifications on public pension systems statewide unless changes are made to it.
He said one of the biggest obstacles created by the pension reform law is that contractors cannot be granted indemnity by retirement boards to protect them from having to defend frivolous lawsuits.
Mr. DelSignore said that is making it difficult for the Retirement Board to hire companies it wants to invest its money with.
“We’ve got a real problem, and it’s a statewide problem,” Mr. DelSignore told the City Council Tuesday night. “”The law does not exclude contractors from gross negligence or fraud. We’re not looking to do that, and we wouldn’t want to do that.
“We’re having a difficult time making investment income now,” he added. “If something is not passed soon to change this law, we’re not going to be able to make any investments in private equities until the end of this year. It’s a big problem, and everyone ought to know about it.”
In the past, Mr. DelSignore said the Retirement Board was able to simply do investments with companies it wanted to do business with after a vetting process by the board.
But he said the pension reform law now requires retirement boards to go through a more rigorous search process when it wants to hire stock managers, bond managers, consultants, lawyers, actuaries or any “open-ended funds” it wants to invest in.
Also, retirement boards are not allowed to invest funds until they receive from the Public Employee Retirement Administration Commission acknowledgment that they complied with the guidelines of the selection process and other requirements.
“They (PERAC) haven’t approved any new investments that we’ve tried to make in the area of private equity,” Mr. DelSignore said. “We cannot hire anybody because of that.”
As a result, he said, the retirement board lost an opportunity to invest with a timber company.
He added that the law is also making it difficult for the board to continue its relationship with Harvest Investments, and there are similar concerns about when the board’s contract with Global Infrastructure comes up for renewal.
“We want to invest $8 million with them, but I’m pretty sure we’re not going to be able to do that,” Mr. DelSignore said. “We’re looking at companies that have been successful for us in the past, and we’re being stymied by our so-called oversight agency. It’s a real problem.
“We’re talking about this in Worcester because we’re coming up with some (investment contract) renewals before a lot of other places,” he added. “But this is going to impact every retirement board that doesn’t have their money with PRIT (Public Reserves Investment Trust fund).”