DENVER—The director of Colorado’s largest state pension plan rejected lawmakers’ suggestions Thursday that he return $1.2 million in bonuses paid to investment managers over the past two years.
Meredith Williams, executive director of the Colorado Public Employees Retirement Association, told the Legislative Audit Committee that the bonuses rewarded work in 2006-2007, when the market—and plan assets—were booming.
The bonuses, paid in 2007 and 2008, were “quite reasonable,” Williams said.
He said further bonuses have been canceled because of the economy, its impact on PERA assets, and outrage over executive compensation at insurance giant American International Group Inc.
Lawmakers suggested the bonuses be returned because assets managed by PERA have dropped from $41.4 billion on Dec. 31, 2007, to $28.8 billion as of March 27.
“Now that PERA has lost nearly $12 billion in assets, can we expect those managers to be returning those bonuses?” asked Rep. Frank McNulty, R-Highlands Ranch.
“They will not be returned,” Williams replied.
Williams said there was no comparison with AIG, which shelled out $165 million in bonuses to employees, including traders in a financial products unit that nearly brought about the insurance company’s collapse. AIG has accepted $182 billion in federal aid.
Williams noted the AIG bonuses were for work done last year.
Colorado’s pension fund faces a crisis because of market turmoil, and “all options are on the table,” including reducing benefits and increasing contributions from employees and employers, Williams said. Any such changes would require legislative approval, which is not likely until next year at the earliest.
McNulty told Williams not to expect a bailout at state taxpayer expense.
PERA has at least 431,000 members and beneficiaries. The 25-year return on the fund’s assets and investments had been 10.8 percent annually through 2007. Losses last year dropped that return to 8.9 percent.
Williams has said that PERA has written agreements to pay bonuses when merited, and that its Board of Trustees approved policy for performance incentives in 2003.
