What You Can Do To Force Your State Pension To Be Transparent About Its Investments

Take action to expose potential mismanagement of your retirement savings.

State and local pensions today are more secretive than ever. The good news: pension stakeholders can use state public records laws to force these retirement plans to be more transparent about their investments.

Transparency in government has long been acknowledged in America as essential to a healthy democracy. On the federal level, the Freedom of Information Act opens up the workings of government to public scrutiny, giving citizens information they need to evaluate and criticize government decision-making.

All 50 states also have public records laws which allow members of the public to obtain documents and other public records from state and local government bodies. State public records laws are built upon the United States’ historical position that the records of government are “the people’s records.” 

Transparency is also critical to the prudent management of trillions of dollars invested in America’s state and local government pensions. Indeed, the single most fundamental defining characteristic of our nation’s public pensions is transparency. Of all pensions globally, our public pensions—securing the retirement security of nearly 15 million state and local government workers, funded by workers and taxpayers—are required under our public records laws to be the most transparent.

Public pensions primarily invest government workers’ retirement savings in securities and funds which are regulated on the federal and state level. Our nation’s securities laws require that securities issuers and fund advisers register with regulators, disclose financial and other significant information to all investors, including public pensions, as well as prohibit deceit, misrepresentations, and other fraud. The statutorily mandated disclosure information is commonly provided in the form of prospectuses, offering memoranda, annual reports, performance reviews and other documents.

Absent full disclosure by investment firms to pension boards and staffs, these individuals cannot fulfill their fiduciary duty to diligently safeguard pension assets. Full disclosure of investment information by the pension to the public is necessary for the stakeholders to understand the investment program, as well as evaluate whether pension fiduciaries are prudently performing their duties.

Thus, in public pension matters, we are concerned with two levels of transparency:

First, under state public records laws, all of the workings of the pension must be open to full public scrutiny, including, but not limited to, investments.

Second, under the securities laws, issuers and investment advisers must fully disclose material information to pensions, boards and staffs regarding pension investments.

Alarmingly, my forensic investigations over the past decade have revealed that public pensions in states such as California, Tennessee, Rhode Island, North Carolina, and Ohio have long abandoned transparency, choosing instead to collaborate with Wall Street firms to eviscerate state public records laws and avoid accountability to stakeholders. Predictably, billions that could have been used to pay government workers retirement benefits have been squandered over time as transparency has ceased to be a priority.

Wall Street cockroaches prosper—thrive—in the darkness. Despite global support for greater transparency, pensions are actually becoming less transparent. Ironically, there is less pension transparency today in the Information Age than 30 years ago.

Less transparency in pensions results in less accountability and greater looting. Therefore, to protect your retirement, you should do everything in your power to promote transparency at your pension and pay particular attention to secretive investments.

Wherever transparency is denied, you should presume that someone has something to hide. 

In pension matters, there is never any justification for keeping secrets from taxpayers and pensioners whose retirement savings are at risk. After all, it’s your money.

So what can you do to force your state or local government pension to be more transparent? That’s a question I asked Marc Dann, an attorney in private practice in Ohio and the former Attorney General of Ohio. (Dann is currently litigating a public records request on my behalf against the State Teachers Retirement System of Ohio.)

Say attorney Dann: “Refer to your state’s public records laws in making a request. Be as detailed and specific in the request as you can possibly be. Remember public records are only those records that may actually exist. For example, instead of asking for a list of all hedge, private equity or venture capital fund investments, ask for a prospectus, offering documents or reports provided to the pension by each investment fund (and name the investment funds—which are generally named on the state or local pension’s website).  Most states allow legal fee-shifting in public records lawsuits. So if the pension or fund resists, you may wish to consider bringing in a lawyer who agrees to be paid his fee from any recovery from the pension. Don't forget to reach out to allied members of your state legislature or city council who can put pressure on the pensions to properly respond to the requests.”

In conclusion, it’s up to you to take action: Push for the transparency you need to determine whether your retirement savings are prudently invested. More frequent public records requests—the threat of greater public scrutiny—will only make pension officials more cautious in their dealings with Wall Street. Fully expect your pension to deny you access to the most important documents related to your retirement savings—particularly the highest-cost, highest- risk so-called alternative investments. However, if you and your fellow pensioners are organized and persistent, you may be able to successsfully force greater transparency. Transparency is the first step toward ensuring you will receive the pension benefits you have been promised.