BRADENTON, Fla. – The city of Atlanta consolidated three pension boards, saying it would improve governance and efficiency while resulting in stronger fund performance and potentially rating upgrades.
An ordinance sought by Mayor Kasim Reed, and passed by the City Council Wednesday, will create one board to manage the general employees, police and fire pension systems. The change takes effect in 60 days.
There will be no change to employees’ pension contributions and no decrease to their benefits at retirement.
“Reforming our pension system has enabled the financial success and stability we have enjoyed for the past several years,” Reed said. “It was equally important that we support our employees with a stronger, more effective governance system.”
Reed said improving investment performance by a quarter of one percent will keep pensions solvent over the next 25 years.
Past pension reforms enacted by Atlanta, he said, helped the city achieve general obligation bond ratings of AA-plus by Fitch Ratings and S&P Global Ratings, and Aa1 by Moody's Investors Service.
“I am confident that with this most recent step, we are well on our way to achieving a triple-A rating,” Reed said.
Consolidating the pension boards was recommended by the Blue Ribbon Commission on Waste and Efficiency in Government in 2014 as a second component to the pension reform Reed championed during his first term.
Reed said combining the boards will result in an improved governance structure that is in line with best practices for pension boards nationwide. He also said it will bring financial expertise to pension investment decisions, reduce administrative costs and ensure investment performance is optimized so that the city’s annual pension cost from is low.
Term-limited, Reed leaves office shortly after Jan. 1.
Former councilmember Keisha Lance Bottoms, an attorney, will become the city’s next mayor, appointing most of the new pension board members.
Under the consolidation plan, the three pension plans will remain separate and the consolidated board will not affect each plan’s process for determining pension awards.
“Our pensions should be governed with excellence and with the highest levels of fiduciary responsibility,” said Councilmember Kwanza Hall. “This ordinance will improve outcomes for city workers and taxpayers, and will support Atlanta’s reputation as a leader in pension reform.”
The current pension fund boards have encountered difficulty in the past with some investments recommended by their former investment advisor, Gray Financial Group doing business as Gray & Co.
Last month, the Securities and Exchange Commission sanctioned Gray Financial Group and barred its president, Laurence O. Gray, from ever associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.
The SEC said Gray and his company mismanaged pension board investments by placing them into alternative investments that were not permitted.
Gray also invested funds on behalf of MARTA, the city’s transit system.