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TRS derivatives’ investment draws lawsuit
A group of retired and active teachers has sued the Teacher Retirement System of Texas and some members of the Board of Trustees over the fund’s investment in derivatives.
The TRS trust fund lost more than $400 million as of last August stemming from investments in derivatives, which the teachers’ lawyer likened to “betting on black or red in Las Vegas at the roulette table.”
“These million of dollars should have been invested in a secure investment such as U.S. Treasury bonds, and accordingly would have never been lost forever,” wrote Pearland lawyer Donald Wilhelm.
The Legislature in 2007 granted TRS the authority to invest in derivatives as part of its portfolio overhaul. For an interesting discussion on derivatives, check out this New York Times piece from Friday.
TRS argues in its response that the members have no standing to sue because they have not been harmed.
“The premise of the suit is that because the net value of assets of TRS trust fund has declined as a result of the historic upheaval in the world economy that plaintiffs have somehow been damaged. That is simply not the case,” TRS lawyers wrote.
“Members and annuitants have no investment account or interest in the pension fund; their interest is in the benefits as defined by law,” and those benefits have not been threatened, the brief says.
A hearing on the lawsuit is scheduled for Monday in Harris County. The Texas Attorney General, which represents TRS, has asked for the case to be dismissed.
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By Chester Cunningham
June 26, 2009 8:10 PM | Link to this
To: TRS Attorneys Let me get this straight. You are the legal advisor to the retirees’ Trustees, and your are advising them that,
Retirees’ contributions to their pension fund through-out their careers do not count as an investment in their retirement?
Poor investments by their investment team do not threaten to adversely impact their benefits?
The retirees have no interest in their pension fund?????
As Trustees, they can’t advocate for their constituents?
And the Attorney General of the state should dismiss the case?
What chance do retired teachers have with that kind of advice being given to their trustees, for heaven’s sake?
Please tell me I’m missing something somewhere.
By J.D.
June 27, 2009 7:06 AM | Link to this
You’re tell me that I’ve invested for more than 32 years of my life into the TRS,as other educators have, and that this loss, in any way,had an impact on our TRS retirement investments?
Then perhaps TRS should consider granting the retired teachers their 13th check! Better yet, granting an increase in benefits or reducing the cost of medical insurance coverage charge to retirees. That should hurt either!
By J.D.
June 27, 2009 7:14 AM | Link to this
Sorry about the previous posting; it should have read as follows.
You’re tell me that I’ve invested for more than 32 years of my life into the TRS,as other educators have, and that this loss, in any way,had no impact on our TRS retirement investments?
Then perhaps TRS should consider granting the retired teachers their 13th check! Better yet,it should be granting an increase in benefits and/or reducing the cost of medical insurance coverage charged to retirees. That shouldn’t hurt either!
By perplexed
June 27, 2009 7:07 PM | Link to this
Funny, during the last session Senator Robert Duncan, a Lubbock lawyer, pushed the need for ERS employees to make larger contributions to ERS in order that their annuities “not be reduced in the future”. In fact employee contributions were raised for ERS, as they had been for TRS in 2007. The underfunding of these two accounts is the perennial announced reason no 13th check or increase in annuities is available. My recollection of the law is that a reduction of annuities is called for if the retirement funds fall below a certain level. And, as Senator Duncan has pointed out on numerous occasions, there is no State back-up guarantee of annuity amounts if this shortfall occurs. It sounds like the Attorney General’s argument is exactly the opposite. Either the amount of the annuity is guaranteed and cannot be reduced if losses occur, in which case the employees have no argument, or the AG is basically calling Senator Duncan a liar. I don’t think you could characterize Duncan’s position as anything other a very strong warning or “threat” that the benefits could and would be reduced in the future without additional employee contributions.
By rubysmom
June 28, 2009 12:34 PM | Link to this
As a recently retired teacher, I have a vested interest in what happens to TRS and the pension fund. That’s why I am appalled (again) at the actions of Rick Perry, the state legislature, and the Texas Attorney General. As usual, I see collusion on their parts to rob one of the largest funds in the state for their own political gains. How can Rick Perry flaunt the idea of a balanced budget, when he and his cronies have done so little to help Texas retired teachers? Where did that money come from? As usual, he and his cronies have managed to tighten their control of the TRS board while offering a crumb of relief to retired teachers (the one time $500 bonus check). No one considered a cost of living adjustment to parallel that of Social Security (which, of course, the overwhelming majority of Texas teachers cannot draw anyway). No where in Texas business is state government holding more of a stranglehold than it is holding over Texas teachers!
By Will Penn
June 30, 2009 3:13 PM | Link to this
Today’s Statesman about Perry’s financial co-chairmen missed the chance to remind the public this is the same Jim Lee that resigned as TRS Chair less than 6 months ago under a cloud of suspicion about unpaid gambling debts to a Las Vegas casino. A few months before that he managed to install one of Perry’s staff, although completely unqualified, as TRS Deputy Director; while running off a well-respected TRS executive that had significant support to be named TRS Deputy. Let’s not forget.
By Big Bad John
July 13, 2009 4:47 PM | Link to this
I am very disappointed that the Retired Teachers did not get the 13th check, but the teachers got a raise, the state employees got a raise and well they should. However, the retired teachers have a frozen monthly check and with the cost of everthing going up and other challenges, something needs to be done. Some of our teacher’s are HURTING financially and are having trouble paying bills. (Isn”t that the reason the above mentioned state employees got the raises, and well they should.)
Please consider the plight of the retirees.
Thank you Governor.