The state auditors have challenged the trustees of the state pension system to rein in a compensation system that pays two fund analysts and the system chairman hundreds of thousands of dollars for less than two months of work.
The State Employees Retirement Commission also paid tens of thousands of dollars annually in flights from Newark, Washington, Charleston, and Orlando to allow actuaries who live out of state to serve on the 15-member panel.
In an unusual move, Auditors Kevin P. Johnston and Robert G. Jaekle recommended changes to the per diem compensation and travel expense reimbursement policies without citing any violations of state statutes or regulations.
Rather, the auditors wrote in a report released late last week that the commission should adopt regulations to limit that compensation and reimbursement to “the lowest reasonable rates.”
But the commission, which the auditors also chastised in an audit two years ago for providing generous compensation and “air travel and hotel costs in excess of what is customary and reasonable,” wrote back that it already has tried to control costs, and that a combination of special circumstances drove up expenses temporarily.
State Sen. Edith G. Prague, D-Columbia, co-chairwoman of the legislature’s Labor and Public Employees Committee, said given the concerns raised by the auditors she believes the compensation issue should be reviewed by lawmakers.
“I can’t believe these numbers,” Prague said Tuesday. “I think we should get to the bottom of this.”
Twelve of the commission trustees–six appointed by the governor and six by the unions–do not receive compensation.
The other three include one actuary chosen by the unions, one chosen by the governor’s appointees, and a neutral trustees, who is chosen by all trustees and who also serves as chairman.
The chairman, Peter R. Blum of West Hartford, is compensated at a rate of $1,600 a day. The per diem rate for each of the other two actuaries, Claude Poulin of North Carolina and Robert D. Baus of New Jersey, is $3,000.
Most of that work involves preparing for and attending meetings of the commission, which oversees the administration of fund benefits. Investment of pension fund assets, though, is the responsibility of the state treasurer’s office. Both Poulin and Baus have been fund actuaries since the mid-1980s.
State law requires that all three actuaries “shall be compensated at their normal and usual per diem fee, plus travel expenses,” with the expenses being paid from the pension fund.
Though that statute provides great latitude to the commission to approve the actuaries’ normal compensation, Johnston and Jaekle suggested that the group voluntarily place some restrictions on those payments.
According to the auditors, per diem payments to those three actuaries rose from a total of $212,450 in 2007 to $391,300 in 2009, an increase of 84 percent.
State Comptroller Nancy Wyman, who is a non-voting, ex-officio member of the panel, also suggested after the last audit that the trustees consider new limits on compensation.
All three actuaries also are entitled to be reimbursed for expenses. Travel reimbursements – nearly all of which involve the two out-of-state actuaries – dropped slightly over that same period, from $29,607 to $26,043.
Blum, Baus and Poulin did not return calls for comment Tuesday.
But the commission wrote back to the auditors that “it is not practical or necessary for the trustees to adopt regulations in the face of a clear standard of ‘normal and usual’ which is already set out” in statute.
The daily payments for the management and labor actuaries rose between 2007 and 2009 from $2,900 to $3,000.
But the commission wrote that the increase in total annual compensation was driven by special circumstances, including pension fund-related litigation and a 2009 retirement incentive program that in turn led to more meetings of both the commission and its subcommittees.
The commission was criticized in an earlier audit for allowing some “excessive charges,” including paying $944 for one round-trip flight for one actuary to attend a meeting; paying $2,198 in travel-related costs tied to two special meetings, each of which lasted less than two hours; and issuing two separate, $2,900 per diem payments to one actuary for the same day’s work.
The commission wrote that it has begun using telephone conferencing and seeking government discounts to control travel expenses.
But a review of commission expense records for the current year showed that Blum claimed two separate $1,600 payments for work provided on March 18 as part of an overall, $8,284 claim for that month. One of those payments was for reviewing meeting notes and attending a subcommittee meeting on the 18th, and the second was for attending the full commission meeting and a second subcommittee meeting on the same day.
The spokesman for the State Employees Bargaining Agent Coalition, Matt O’Connor, said the commission did face a difficult test last year administering a $19 million pension fund, but didn’t address the auditors’ question of whether compensation is excessive.
“There is no question that those entrusted with that important task should be compensated for their expertise and time,” he said, adding that “2009 was, however, an extraordinary year” given that 3,800 employees opted for the retirement incentive program, the Retiree Division within the comptroller’s office has been without director for much of the past two years, and the division still faces a backlog of roughly 10,000 applications for retirement benefits.