US - The Houston Municipal Employees Pension System (HMEPS) fears a proposal to change the makeup of its board of trustees would dilute the fiduciary responsibility trustees currently have to the plan's participants.
Texas House of Representatives member Martha Wong has filed a House Bill that would change the makeup of the board of trustees so that the majority are not participants of the plan.
Currently, the pension board is comprised of nine trustees – six are elected by municipal employees, one is the mayor or his designated representative, one is the city’s treasurer and the ninth is a resident appointed by the six elected trustees. All members of the board are pension beneficiaries.
Under the bill, which if passed would take effect September 1, 2005, the HMEPS board would include: an actuary, two municipal employees, two registered investment advisers, a mayoral appointee, two retirees and one citizen. Trustees would also be limited to four consecutive three-year terms.
The board has voiced its concern about the negative impact the bill could have on its pension plan.
“The current HMEPS board of trustees believes it is in the best interests of HMEPS participants for the majority of trustees to be participants in the fund,” the board said in a statement.
“This achieves a responsible balance of representation that is fair and equitable, and maintains a system of checks and balances that protect the interests of HMEPS participants and ensure a strong pension system. Board members continue to feel it is more appropriate for these issues to be dealt with at a local level instead of a state level and our executive director has been in ongoing discussions with city leaders throughout the past year to come up with a solution that is satisfactory to all sides.”
Wong argues the changes would prevent taxpayers from bearing the financial brunt of poor management of the fund. The city faced a US$2bn shortfall in municipal pension system last year. Cuts in pension benefits reduced the gap to an estimated US$850m.
The bill was left pending in the House Urban Affairs committee this week.
HMEPS is a governmental defined benefit pension plan that provides retirement, disability and survivor benefits to some 19,000 participants.
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