Teachers
not affected by Enron losses
By Tanya Dellaca
Summer Forty-Niner
Despite
Enron’s astronomical losses, legally protected
public retirees have not directly felt the
sting of those losses.
With approximately 1.3 million members and
$149 billion in assets, the California Public
Employees’ Retirement System, which provides
retirement and health services to public
employees including Cal State Long Beach
employees, is one investor who has lost
money.
“We had some losses with Enron but it does
not impact the retirement benefits we pay,”
CalPERS Office of Public Affairs spokesperson
Brad Pacheco said. “We are very well diversified
so we are prepared to absorb the losses.”
“The retiree benefits we pay are guaranteed
by law, Pacheco added. ”
Armando Contreras, executive assistant to
CSULB President Robert Maxson said, “All
funds have lost money and assets have declined
but we are in no jeopardy yet. “The [retirement]
funds did really well in the good years.
They are large funds and there is nothing
to indicate any peril.”
The California State Teachers’ Retirement
System, which covers Long Beach Community
College’s teachers, is confident the benefits
it pays will also not be affected.
“There is no cause for alarm,” CalSTRS Public
Information Officer Sherry Reser said. “We
are also a defined benefit program, meaning
our benefits are guaranteed by law.”
CalSTRS losses reached about $47.5 million
to their $93 billion current investment
portfolio.
“Forty-seven million is a lot but we are
a very well diversified, long term investment
firm,” Reser said. “Our investment horizon
is forever, which is different from the
individual investor, we can weather out
these ups and downs in the market that come
every few years. We were due, for a ‘bear
market’ [so we] build safeguards into the
portfolio to weather these storms.”
Fifth-grade teacher in the Los Angeles Unified
School District Melissa Bates said, “When
you are a teacher you don’t pay into Social
Security, so you have to plan something
else or you will have no retirement.”
Bates currently has no retirement plan in
place and uses her unused accumulated sick
time and paid days off as her security.
“Right now I am opting to do nothing,” Bates
said. “I have 10 paid sick days and 90 paid
half days off per year and I haven’t touched
it.”
“[Enron’s bankruptcy] affects everybody,
not only the people that work in the company
but we all have to pay for it,” Bates added.
Enron’s bankruptcy filing in December 2001
resulted in the company becoming the first
largest bankruptcy in history, which according
to court documents, the bankruptcy included
not only Enron Corp., but also 90 total
Enron held companies.
The filing also resulted in a Congressional
investigation into money laundering and
fraud, which left some investors nervous
and seeking future protections.
“Some nerves have calmed but people were
concerned about the corporate abuses,” Pacheco
said.
CalPERS is seeking legislation to eliminate
conflicts of interest and to guarantee greater
corporate disclosure, Pacheco said.
“The corporate abuses are a problem and
we are working to bring reforms to the market,”
Pacheco added.
According to its mission statement, one
of CalPERS goals is “Advancing the financial
and heath security for all who participate
in the System.”
Other groups actively seeking reforms are
the National Conference of Public Employee
Retirement and the National Council on Teacher
Retirement.
“Everyone was shocked,” Executive Director
of NCPER Fred Nesbitt said of the Enron
bankruptcy. “The public sector funds are
much more critical and stricter and we are
concerned about how they are doing their
research. We want to make sure the research
is good research. We are concerned that
money managers are being misled.”
Nesbitt, shedding some light on CalPERS
losses said, “Enron’s bankruptcy affected
less than one percent of CalPERS total assets.
They lost money [with Enron] but they also
made money [with Enron].”
According to a statement from CalPERS, legislation
arising from history’s largest bankruptcies,
filed by Enron, WorldCom and others includes
the Sarbanes-Oxley Act of 2002 signed in
to law by President Bush on July 30.
The act, Public Law 107-204 authorizes a
new private sector oversight board whose
members will be appointed and overseen by
the Securities Exchange Commission. The
new authority will be called the Public
Company Accounting Oversight Board according
to the release.
The release states that the new board will,
“register public accounting firms, set standards,
conduct inspections and investigations and
enforce its rules. All public accounting
firms will have to register with the board
and all publicly traded companies will have
to utilize a PCAOB-registered firm.”
Enron employees’ retiree and other benefits
have been affected differently according
to their employment status and also vary
depending upon the date their status changed,
according to a source at Enron’s third party
health and insurance benefit administrator,
Towers and Perrin said.
Enron officials have declined to comment
on the matters.
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