Lawsuit Asks Court to Stop MSF Management Fee

Wednesday, January 24, 2018 | 0

A handful of employers and employer organizations have filed a lawsuit seeking to block a 3% management fee on the Montana State Fund’s investment portfolio that lawmakers approved in November to help close a $227 million budget deficit, according to a report by the Helena Independent Record.

The lawsuit filed Monday claims that the management fee that would cover costs the state incurred in fighting wildfires last year amounts to an improper taking of money that policyholders paid for workers’ compensation coverage, the Independent Record reports.

The fee is not based on actual administrative costs that the state Board of Investments incurs in handling the State Fund’s portfolio, the lawsuit claims. Rather, the fee was calculated to help close the budget gap.

“It is not the duty of Montana State Fund policyholders to solve the state’s budgetary or fiscal woes,” plaintiffs argue in their complaint.

Plaintiffs include the National Federation of Independent Business, Montana Roofing Contractors Association and seven individual employers. One business suing to block the management fee, Moody’s Market, is owned by state Rep. Greg Hertz, R-Polson, who voted against the bill that authorized the fee, the Independent Record reports.

Gov. Steve Bullock, a Democrat, on Nov. 24 signed Senate Bill 4, authorizing the Board of Investments to assess a 3% fee on any portfolio with an average balance of more than $1 billion.

The Public Employees Retirement System has a $5 billion portfolio, and the Teachers’ Retirement System has a portfolio worth $3.6 billion. But those programs have unfunded liabilities, according to Sen. Ed Buttrey, R-Great Falls. As a result, Buttrey said, only Montana State fund would pay the management fee on its $1.5 billion portfolio, under his bill.

Montana State Fund filed a complaint with the district court in Helena arguing that the fee is unconstitutional. But the carrier’s board of directors voted to drop the complaint after Bullock appointed one of his advisers and former Democratic state Sen. Cliff Larsen to replace two directors whose terms expired in April.

The new complaint employers filed with the district court in Lake County requests an order prohibiting the Board of Investments from collecting the management fee, directing it to repay Montana State Fund any amount already collected, plus interest.