School pensions plan might recover funds lost on mortgage-backed securities
Pennsylvania’s school pension fund will recover some of the losses it suffered in the Great Recession after the settlement of a class-action suit against Bank of America.
The Pennsylvania School Employees Retirement System, or PSERs, has $51 billion in assets and was the lead plaintiff in a 2011 lawsuit against Bank of America. The suit alleged the financial institution hid debt and misled investors about its position in mortgage-backed securities between February 2009 and October 2010.
U.S. District Court Judge William H. Pauley III, of the Southern District of New York, this week approved a $335 million settlement. Tuesday’s ruling ends nearly six years of litigation.
Attorneys for Bank of America did not return a call for comment.
PSERs spokeswoman Evelyn Williams said it is unclear how much the pension fund will recover in the settlement.
“Final payouts to members of the class are still being determined,” Williams said.
Other large institutional investors that joined the suit included the Arkansas Teacher Retirement fund, the Anchorage Fire and Police Retirement fund and two trade union funds as well as asset managers.
Williams said PSERs lost about $8 million on its Bank of America holdings. But “calculated losses do not equate to recoverable damages,” she cautioned.
The pension fund, which represents more than a half million retired and active school employees, pays out approximately $6 billion annually in benefits.
The value of the fund, which is underwritten through employee, state and school contributions and investment returns, slipped from $68 billion in 2007 to $47 billion in 2010.
As of June 30, 2015, the fund had $37.3 billion in unfunded liabilities. Williams said a combination of losses during the recession, as a series of unfunded benefit increases between 2001 and 2003 and more than a decade of underfunding by the state and schools, contributed to the unfunded liability.
Debra Erdley is a Tribune-Review staff writer. Reach her at 412-320-7996 or [email protected].