The South Carolina Retirement System Investment Commission, Columbia, is nearing the end of a three-year overhaul of its governance structure and investment processes.
The overhaul was based on the 124 recommendations of a fiduciary performance audit conducted in 2014 by Funston Advisory Services LLC, Bloomfield Hills, Mich.
The 2014 fiduciary audit was mandated by the South Carolina Legislature and implemented by Patrick J. Maley, state inspector general.
Some of the Funston report's most important recommendations were about increasing and improving the commission's investment oversight, but others were designed to improve the commission's working relationships. There had been tension during the previous two years between state Treasurer Curtis M. Loftis Jr. and the other six commissioners and the commission staff.
The RSIC was created by legislative mandate on Oct. 1, 2005, with exclusive authority to invest the now $28.8 billion South Carolina Retirement Systems, Columbia. Previously, the state's Budget and Control Board approved recommendations of an investment panel.
Through internal procedural changes and enabling legislation, the RSIC has made almost all of the significant changes recommended by the Funston report, including:
- The executive director role was created.
- Commissioner oversight was shifted to provide strategic guidance over investments from an advisory role focused on investment manager selection and due diligence.
- Investment principles were adopted.
- Custody of state pension fund assets was moved to the plans' administrator, the South Carolina Public Employee Benefit Authority, Columbia, from the state treasurer's office.
- The RSIC assumed management of custodial operations on behalf of the Public Employee Benefit Authority.
- Reporting of performance and investment management fees was standardized.
- The number of RSIC commissioners was increased to eight from seven, making the PEBA's executive director a non-voting member.
- The state treasurer can't serve on the RSIC and must appoint a qualified individual to serve as a commissioner.
The new law also lowers the retirement plans' annual assumed rate of return to 7.25% from 7.5%. The investment commission and the benefit authority now have more power to change the plans' assumed rate of return; previously, only the state Legislature could change the rate.
Michael Hitchcock, the RSIC's executive director, said the reform "was a major piece of legislation that addresses the plans' unfunded liability," noting a joint House and Senate committee for pension reform hammered out many of the tough issues, resulting in a comparatively smooth passage of the bill.