Money for Nothing

And the IAP ain't free. In response to Oregonian reporter Jim Mayer's question (actually my question, which Jim Mayer kindly asked for me), Steve Rodeman of PERS answered that interest on IAP money deposited with PERS but not yet invested in member accounts accrues to PERS to help defray administrative costs. Rodeman was not specific about "administrative expenses" and Mayer didn't follow up with the obvious question: "Administrative expenses for what?" We all know that the IAP costs money to administer. We also know that all PERS programs (Tier 1, Tier 2, OSGP, IAP, OPSRP) have administrative costs. Typically, the administrative costs come out of earnings before earnings are credited to member accounts. Presumably PERS also makes money on the float from contributions to those funds too. What is puzzling to me is that PERS also charges IAP members a monthly account fee (currently $2.37), which is specifically designated to cover "administrative fees". In addition, members report that Citistreet, the third party recordkeeper PERS contracts with to handle the IAP records, charges an additional $1.17 per month per account. So, all these fees really beg the important question: "If PERS is keeping the interest earned on the 30-45 day 'float' of member contributions, and the unit value is always adjusted take out administrative and management fees, and every member gets charged $2.37 per month by PERS for 'administrative fees', exactly which administrative fees do the 'float' earnings on IAP contributions actually defray?" It seems to me that these 'float' earnings just go into a big pot called "administrative earnings" and PERS covers administrative expenses for all programs from this pot. As I've noted before, I don't have any dog in this fight, but it still galls the hell out of me that members have no choices about any of this and they're just getting hammered by this creature of the legislature. Even if PERS makes members whole, will the "wholeness" include rectifying all these excessive charges? All these various ways of extracting "administrative expenses" from IAP contributions (which belong to members), seem to violate the fundamental principle that the costs of the IAP program be borne by IAP members. It strikes me that the member's IAP account costs rank up there with the most expensive investments an individual can make. I'd guess that the total fees (both explicit and hidden) per account, expressed as a percentage of income managed is higher than the most expensive and poorly managed mutual fund out there. I'd be happy to be proven wrong. In the meantime, I stand by my assertion that members are spending money for nothing, and getting nothing for free.