RELEASE: Treasurer Summers Launches Aggregated Pricing Initiative to Achieve Savings Across all Public Pension Funds

Laborers’ Pension Board Supports Initiative as a First Step 

CHICAGO – Chicago City Treasurer Kurt Summers today announced an aggregated pricing initiative that will help create significant savings on the annual investment fees for all of Chicago’s 11 public employee pension funds. By promoting collaboration among local retirement plans to secure lower investment fees, the initiative has the potential to save more than $1 billion over the lifetime of all 11 pension plans.

As a first step toward aggregate pricing, at a board meeting yesterday the Treasurer introduced a joint resolution to the Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund (LABF), who approved support of the initiative. The Treasurer will continue to introduce the resolution to the remaining 10 boards and begin collecting data from the funds over the next month. Today’s announcement is part of Treasurer Summers’ commitment to finding solutions that will maximize the City’s investment portfolio while protecting working families.

“I thank the Laborers’ Pension Board for their partnership in working to achieve substantial savings across all pension funds in the city of Chicago,” Treasurer Summers said. “As the trustees of the city’s pension funds, it is our fiduciary duty to find the best possible investment opportunities with the lowest expenses to our participants. Approval of this initiative is the first step to ensuring a long-term impact on our pension system. I look forward to working with all of the pension boards and their investment managers to find common ground on behalf of taxpayers, workers and retirees.”

“Labor has been working closely with the city to come up with innovative ways to increase savings across the board,” Jorge Ramirez, President of Chicago Federation of Labor said. “We applaud the efforts of Treasurer Summers to protect the investments of working families which will strengthen the security of current and future retirees.”

Currently, the city’s 11 pension funds have approximately $35 billion in assets invested and each have their own procurement processes for contracting with investment managers, resulting in $144 million in investment fees annually. Each fund is treated separately and investments and their fees are not considered in aggregate. This often leads to one pension fund paying more than another and driving up the overall cost.

There are 236 unique investment managers across all pension plans, however the top 50 manage more than 75 percent of all fund assets. Additionally, 80 percent of the investments have “overlapping” managers.  There are discrepancies in pricing from plan to plan, even in instances where the investment manager is the same. For example, some funds are paying 30-40 percent more on investment fees than other local plans. In many of these cases, implementing aggregated pricing can save some of the plans up to 50 percent on those fees.

The joint resolution proposes that each of the 11 pension fund boards partner with the Treasurer to share information regarding the amount of management fees paid to investment managers and work together to seek remedies to reduce those fees.

“There is no downside to this proposal,” Ralph Martire, Executive Director of the Center for Tax and Budget Accountability said. “This is a responsible approach to management of a portfolio that not only benefits the funds themselves, but it will also benefit taxpayers significantly over the long-run.”

These significant savings will have a direct impact on improving all local plans without impacting workers, retirees or taxpayers and also without changing board governance, investment decision processes or asset allocation decisions of any of the plans. Other cities that have adopted aggregate pricing practices include New York City, Atlanta and Los Angeles.

The 11 pension boards include: The Municipal Employees’, Officers, and Officials’ Annuity and Benefit Fund (MEABF); Policemen’s Annuity and Benefit Fund (PABF); Firemen’s Annuity and Benefit Fund (FABF); Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund (LABF); Public School Teachers’ Pension and Retirement Fund (CTPF); Park Employees’ and Retirement Board Employees’ Annuity and Benefit Fund (PEABF); Retirement Plan for Chicago Transit Authority Employees (the CTA Retirement Plan); Chicago Transit Authority Retiree Health Care Trust (the CTA Health Care Plan); County Employees’ and Officers’ Annuity and Benefit Fund (the Cook County Fund); Forest Preserve District Employees’ Annuity and Benefit Fund (the Forest Preserve Fund); and the Water Reclamation District Retirement Fund (the MWRD Fund).​

In his 90 Day Action Plan released in December, Treasurer Summers laid out a blueprint of potential opportunities to better serve and directly impact the people of Chicago. The plan includes responsibly and actively investing in Chicago, protecting retirement benefits, expanding financial education and enhancing small business opportunities across the city. Today’s announcement is part of the Treasurer’s proposal to promote collaboration across local retirement plans to secure lower investment fees.

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