HARRISBURG, Pa. (AP) — The top two executives at Pennsylvania’s largest public pension system will leave their jobs under resolutions approved by the system's board Thursday, amid two federal investigations into the agency and calls by board members for their resignations over lackluster investment returns.
Their departures come after a protracted fight to get the $72 billion Public School Employees’ Retirement System — which manages one of the nation’s biggest public pension funds — to divest its pricier investments in things like private equity firms.
Under the resolutions, executive director Glen Grell and chief investment officer Jim Grossman still have weeks left in their jobs before transitioning to advisory positions — at the same rate of pay — to be created by the system for several more months.
Board majorities voted to accept what the resolutions called a “retirement” by the two men, but the votes were not unanimous on the 15-member board. The resolutions also said final agreements would be executed, but gave no details about what the agreements entail.
The board chair, Christopher SantaMaria, did not return a phone message seeking answers about the terms of the separation agreements. The retirement system's spokesperson said the agreements were not finished.
Grell will leave Feb. 28, after spending the final two months as an adviser. Grossman will leave May 1, after becoming an adviser on Dec. 9. Grell makes $227,000, according to online state records, while Grossman makes $485,000.
Neither Grossman nor Grell spoke at the board meeting.
Grell declined comment later.
A lawyer for Grossman, Matt Haverstick, declined comment on the terms of Grossman's departure, saying only that Grossman “will soon have 25 years of state service and he’s ready for the next part of his career.”
Six board members — including Gov. Tom Wolf's appointees, state Treasurer Stacy Garrity, state Sen. Katie Muth and the head of the Pennsylvania School Boards Association — voiced displeasure in June, calling for the resignations of Grell and Grossman.
Compared with their value of $64 billion as of Dec. 31, the system's assets should have been $81 billion, or 30% higher, had its investment performance measured up to the best public pension plans over the prior decade, they said in a letter released publicly.
Even had the systems' investments been merely average, it should have had nearly $68 billion, or almost 10% more, they said.
That comparatively poor performance has cost taxpayers billions of dollars, they said.
They also criticized the investment strategy under Grell and Grossman, saying they relied far too heavily on alternative investments, which meant paying higher investment fees, rather than publicly traded stocks and bonds.
The board members aired their grievances after the board disclosed in March that it was investigating a consultant’s calculation last year about the fund’s long-term investment performance that was wrong.
The subpoenas for information, however, were not limited to the rate calculation. The FBI also delved into the pension system’s purchases of adjacent parcels of land in downtown Harrisburg. The SEC's subpoena sought information about the exchange of gifts, trips, money and other things between system employees and its hired investment managers, consultants and advisers.
A battle over how the pension system invests money has consumed the agency and the board, with some board members pushing for years for the system to dump its pricier investments.
In October, the board voted to begin considering a plan to end its investments in hedge funds in favor of increasing its investments in public equities, like mutual funds. The board said it expected to consider a study on it in December.
This story has been corrected to show the date of Grossman's departure is May 1, not May 22.
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This story was first published on November 18, 2021. It was updated on November 22, 2021 to correct that the school employee pension system’s assets are $72 billion, not $62 billion.