The outside firm responsible for tracking the Maryland pension system's performance erred when calculating the investment returns for the just-completed fiscal year, a gaffe that means the gains for fiscal 2003 were lower than previously announced.
The State Retirement and Pension System of Maryland uncovered the error itself during a routine audit. The system, which had $26.7 billion in assets as of June 30, manages money for about 250,000 active and retired members
Correcting the error lowers the reported gain for the year that ended June 30 from 3.47 percent to 3.22 percent.
Public pension funds with more than $1 billion in assets had a median return of 4.02 percent for that same period, according to the Trust Universe Comparison Service (TUCS), a Wilshire Associates benchmark that's the best-known for public investment plans.
Though seemingly small, the reduction in the Maryland system's reported investment return had a somewhat larger impact on the how this state's retirement plan ranked against its peers.
Previously, 65 percent of other public pension funds were said to have performed better than Maryland. But under the reduction, 74 percent of these funds had better investment returns than this state, the pension system said.
The error was made by a unit of State Street Corp., which provides pricing, accounting and other services for more than 40 percent of all mutual funds, and more than 40 percent of all public pension plans, including Maryland's.
"Indeed, we did miscalculate the fiscal-year performance return of the [Maryland] pension fund," said Hannah Grove, senior vice president of marketing and communications for the Boston bank.
"It was an isolated issue, and as soon as the error was brought to our attention, we resolved it. None of the accounts were affected."
Joseph M. Coale III, spokesman for the Maryland retirement agency, said the miscalculation was uncovered by a member of the state pension plan staff during a routine internal audit of the results recently delivered by State Street.
"We discovered this [miscalculation] here, and we reported it" to the pension plan's board of trustees, Coale said. "And while we regret the mistake, we're pleased that we found it ourselves."
In late 2001, after Maryland was ranked dead last in the Trust Universe Comparison Service's ratings, a political firestorm was touched off when it was discovered that that ranking was never presented to the board of trustees.