‘Cooking the books’: What an audit of MN pension fund means for teachers
For years, American Experiment’s message on teacher pensions has been clear: We need to keep the pension promises made to teachers.
The Teachers Retirement Association (TRA) — which manages pensions for the majority of active and retired educators in Minnesota — has a history of unfunded liabilities and unrealistic assumptions about investment returns on pension assets, which impact the fund’s financial health and long-term viability. Benefits are backloaded, and new teachers’ paychecks are used to protect the payments promised to older colleagues.
A recent forensic audit of the TRA, crowdsourced by a grassroots organization of Minnesota educators, found “underreporting” of “annual fees paid to Wall Street investment managers” and “posting” of “near-impossible gains,” according to Edward Siedle, a former U.S. Securities and Exchange Commission lawyer and independent pension investigator, hired to conduct the audit.
Siedle told the New York Post that TRA has “publicly disclosed less than 10% of an estimated $2.9 billion spent on fees in the past 10 years” and “posted gains claiming it beat its own custom benchmark over periods of one, five, 10, 20 and 30 years by exactly 0.2%,” which, according to Siedle, is “virtually impossible.”
The TRA reported $24.19 million in management fees in 2023. But Siedle estimated the total paid to Wall Street fund managers ranged from $334 million to $467 million, or 5% to 7% of the TRA’s private assets. Even if the fees were only 1%, they would total $280 million — more than 10 times the disclosed fees.
Siedle’s findings of alleged “cooking the books” raise questions “whether the fund is concealing mismanagement, and ultimately whether there is enough money to pay retirees their promised benefits,” he told the Post.
Gov. Tim Walz chairs the Minnesota State Board of Investment, which is responsible for monitoring and evaluating the assets of the TRA “with the goal of making sound investment decisions.” State Auditor Julie Blaha and State Attorney General Keith Ellison are also on the board. The TRA gets 73 percent of its revenue from investment income.
“…[T]he Minnesota attorney general and state auditors would normally investigate irregularities, but those officials sit on the same state pension board that Walz chairs,” according to Siedle’s report shared by the Post. “As a result, Siedle filed a whistleblower complaint with the U.S. Securities and Exchange Commission (SEC) and the FBI last month.”
The group that hired Siedle, the Minnesota Public Educators for Pension Reform, raised over $78,000 on GoFundMe to pay for the audit and has “complained of ‘inequities,’ including ‘significantly decreased benefits’ for some members,” reports the Post.
One member, teacher Katie Dickerson, testified in February before Minnesota’s Legislative Commission on Pensions and Retirement Committee, shared the Post.
“As I am getting closer to retirement, I realize the state never made improvements to our retirement system. Not only do we have a high contribution rate to TRA, but we…are forced to work many more years unless we are willing to be hit with huge penalties.”