For Immediate Release
Monday, April 22, 2002
AFSCME Warns Members about New Florida Retirement Plan; Calls on State to Halt Its Implementation in Wake of Enron Disaster
Union Reveals Pension Reform Agenda, Launches New Web Site
TALLAHASSEE, FL —Council 79 of the American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO, today kicked off a campaign to protect the retirement benefits of Florida public employees and change the governance system of their pension plan.
Just months after the current retirement system lost $330 million on Enron stock, the State Board of Administration (SBA), which oversees the retirement system, is now offering state employees a new investment program called the "Investment Plan." Employees would be able to replace, at their option, their current defined benefit retirement plan.
AFSCME Council 79 President Jeannette Wynn criticized the new plan for not providing guaranteed benefits and raised questions about the State Board of Administration's role in overseeing plan investments.
"We believe that the State Board's move away from guaranteed pensions for state workers is bad policy and bad for these workers. We question the credibility of these trustees, who are the same people who presided over the fund's $330 million Enron loss," Wynn said. Wynn outlined her concerns in a mailing sent to the union's membership.
Wynn blasted SBA officials for failing to protect the current retirement plan from the $330 million loss on Enron stock - the largest loss of any state retirement fund in the nation. Alliance Capital Management, one of the pension fund's money managers until the end of last year, continued to put money into Enron stock even as news about the company's financial instability was becoming clear. A top Alliance Capital Management executive was a member of Enron's board of directors.
"Why did Alliance Capital keep investing in Enron when they already knew that the company had serious problems? We need to know the truth about this situation," Wynn said.
The union has formally asked state officials to turn over any documents related to potential mismanagement on the part of the SBA in its relationship with Alliance Capital Management in the Enron investment scandal. Under the state's sunshine laws, Council 79 has requested all information related to the SBA's role in Alliance's oversight including Enron-related communications and investment decisions in 2000 and 2001; phone records, e-mails, memos, or other types of communications from Coleman Stipanovich, Deputy Executive Director, a leading contender to replace outgoing Executive Director Tom Herndon, and other key SBA officials; and notification of investments by the fund in Enron partnerships since 1998. The Florida Attorney General is filing a suit against Alliance in the Enron case.
The union is also calling for a delay of the implementation of the Investment Plan until the State Board of Administration is cleared from any potential concerns about mismanagement, conflicts of interest, or breach of duty in the Enron case.
In addition to concerns about the SBA, Wynn outlined several other problems with the proposed Investment Plan:
- Unlike the current plan, retirement benefits will not be guaranteed;
- Participants' retirement benefits are eliminated once their individual accounts are depleted;
- Participants will not be able to broadly diversify their assets; and
- Some of the Investment Plan's choices will have mandatory advisory fees that could reduce the amount of return.
During the next session of the State Legislature, AFSCME will seek to change the structure of the SBA, including the direct election of plan participants to the SBA. Currently only three directors (the Governor, Treasurer and State Comptroller) govern the Board. The Florida Retirement System is one of only a handful of states that operates without the oversight of an independent board of trustees.
AFSCME Council 79 has launched a new web site www.afscme.org/floridapension where it will post information about Enron developments and the Investment Plan.
AFSCME Council 79 represents Florida's 110,000 public service employees. AFSCME is the nation's largest public service employee union with 1.3 million members.
