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Committee hears concerns after legislature-authorized in‑house investment pay plan moves forward
Summary
A bill would rescind authority that allowed the State Investment Board to create incentive compensation schedules. Supporters sought to revisit a recent policy that declassified about 19 of 34 Retirement & Investment Office positions for bonus eligibility; agency leaders and the State Treasurer defended the program as a tool to recruit and retain
Representative Mitch Ausley told the House Government and Veterans Affairs Committee he introduced House Bill 13‑48 to rescind the recently adopted incentive compensation framework for the State Retirement and Investment Office (RIO) and to require a fresh, broader legislative review.
Ausley said the prior legislature gave the State Investment Board authority to craft a compensation plan for in‑state fund managers but that the final policy went further than many legislators remembered. He said approximately 19 of 34 positions were made eligible for incentive compensation, including senior posts, and that some top officials who helped fashion the plan also advised consultants who recommended the plan. “There are approximately 20 positions that were declassified to be eligible for this new incentive compensation, including the chief investment officer and executive director… I do not believe that all of these… were intended by the last legislature to be in this new comp plan,” Ausley said.
Interim RIO executive director Jody Smith and Chief Investment Officer Scott Anderson testified in opposition to the sponsor’s request to repeal the plan. Smith said the State Investment Board followed a public process that included an RFP for consultants, committee reviews and multiple public meetings. She said the policy limits eligibility to staff directly involved in implementing investment decisions, and she provided committee materials showing how bonus payouts would scale with multi‑year excess returns and how payouts compare to potential savings from reduced manager fees if more assets are managed in‑state.
Smith urged caution about rescinding the authority now: the in‑house investing program has already begun onboarding staff and had scheduled a planned “go‑live” date in March. Rescinding the incentive policy, she warned, could force the board to unwind the in‑house program and forfeit projected manager‑fee savings. She said consultants recommended benchmarks and payout structures designed to bring compensation toward mid‑market pay while tying payouts to multi‑year excess returns above independently determined benchmarks.
Scott Anderson explained technical details of the benchmarking approach. He said the board retained an independent benchmark consultant to set appropriate, asset‑class‑specific benchmarks (not a single S&P benchmark) and that incentive triggers tie to excess returns measured after costs. “We set our expectation at 25 basis points… 50 basis points… would be deemed top quartile,” Anderson said, and he emphasized the plan uses multi‑year averages to limit payouts for one‑year performance spikes.
State Treasurer Thomas Beadle, who chairs the investment committee, also defended the process and provided a Mercer compensation study comparing RIO pay to public‑sector and private benchmarks. Beadle said the board and subcommittees vetted the policy and added safeguards, noting the board can modify or rescind the schedule and that bonus payments must be approved by the State Investment Board.
Committee members expressed concern that many legislators first learned the full scope of the authorization after the session. Representative Steiner and others favored revisiting the plan but were reluctant to dismantle a program mid‑implementation. Several members suggested a pause and directed RIO to return with additional reporting and transparency—posting benchmarks, payout policy and a plan for staged implementation so lawmakers could review details during the session.
No committee action on HB13‑48 was recorded in the hearing transcript. Several committee members encouraged RIO to work with Legislative Committees and provide updated materials while the board’s governance and compensation subcommittees revisit the policy.
Why it matters: The State Retirement and Investment Office manages billions in public funds for pensions and the legacy fund. Changes to compensation policy affect recruitment and retention of investment professionals and may influence whether more assets are managed in‑state, with potential fee savings and performance implications for beneficiaries.
What’s next: RIO and the State Investment Board signaled willingness to adjust policy and improve transparency; the committee requested follow‑up reporting. If the sponsor presses the repeal, lawmakers would need to weigh short‑term disruption against recruitment and long‑term fee savings.
