Bill to repeal RIO incentive compensation program gets do not pass recommendation
Feb. 10—JAMESTOWN — The North Dakota House Government and Veterans Affairs Committee gave a do not pass recommendation on Thursday, Feb. 6, on a bill that would repeal a section in the North Dakota Century code related to an incentive compensation plan for the state Retirement and Investment Office.
Rep. Bernie Satrom, R-Jamestown, vice chairman of the House and Government and Veterans Affairs Committee, was the lone dissenting vote.
Satrom and Reps. Mitch Ostlie, both R-Jamestown, and Mike Beltz, R-Hillsboro, introduced House Bill 1348, which would also amend North Dakota Century Code 54-44.3-20 by removing investment and fiscal operations positions of the Retirement and Investment Office from being exempt from the state employee classification system.
The passage of HB 1348 would repeal an incentive compensation program that could allow the top officials in the North Dakota Retirement and Investment Office (RIO) to earn up to 100% of their salaries as incentive compensation although RIO officials said that might not happen every year.
The annual salaries for the RIO executive director and chief investment officer are $237,400 and $312,000, respectively.
Rep. Vicky Steiner, R-Dickinson, said she appreciates Ostlie for bringing HB 1348 forward.
"I think when something goes through budget section and that is actually our own problem is being legislators is it's very difficult to find out the budget section heard this and what it meant and doesn't get back to all of us and you are thinking there are four people involved and not 20," she said. "But when you hear the explanation today, it's pretty obvious that it's being vetted very well. So I feel comfortable that it's being vetted."
Rep. Austen Schauer, R-West Fargo, chairman of the Government and Veterans Affairs Committee, said there was a lack of communication between legislators about the development of the incentive compensation program.
He said he wasn't sure if the incentive compensation program should be repealed or opened up for further review.
The documents of the incentive compensation program say it is designed to help attract and retain talented investment professionals. The program is also designed to help RIO earn the highest possible investment returns at a reasonable cost and at controlled levels of risk and rewards long-term investment performance.
During the 2023 legislative session, the state Legislature authorized the Retirement and Investment Office to develop an incentive compensation program for its investment and fiscal operations positions necessary for the management of funds under the control of the State Investment Board.
North Dakota Century Code Chapter 54-52.5 says that the North Dakota Retirement and Investment Office may develop an incentive compensation program for full-time-equivalent investment and fiscal operations positions necessary for the management of the investment of funds under the control of the State Investment Board. The State Investment Board must approve annually the provisions of the program.
Nineteen of the 34 RIO employees are eligible for the incentive compensation program, said Jodi Smith, RIO interim executive director.
The incentive compensation program provides incentive compensation as a percentage of regular compensation with 80% of the incentive compensation based on the financial performance of the investments and 20% based on individual goals, according to the Retirement and Investment Office's budget No. 190 for SB 2022. If the three-year rolling average return of the investments exceeds the benchmark return by 0.5%, 100% of the incentive compensation based on financial performance is available to the employees, the document says.
The maximum incentives as a percentage of regular compensation are as follows:
* 100% for the chief investment officer and executive director
* 90% for the deputy chief investment officer
* 75% for the chief risk officer, senior investment officers, and portfolio managers
* 60% for the chief financial officer
* 50% for investment officers, risk officers and accounting managers
* 25% for senior investment accountants and investment accountants
Plan participation is determined based on employment status and the executive director's assessment of the position's impact on the Retirement and Investment Office's overall investment performance.
"The 100% down to 25% seems to be a little bit max, but we don't really know the going rate ... ," Schauer said. "So I don't know if it's like we just cut it out completely, or we just open the door for further review on what we're doing."
Those who oppose HB 1348 say the incentive compensation program was needed to recruit and retain employees for RIO and to incentivize them to perform on their investments.
"In their industry, that's what they're accustomed to," Smith said. "That's how they're set up a lot of times in their industry to perform as they have that base salary, and then they get that incentive compensation. So from that perspective, for those individuals, they are under market."
She said RIO could lose employees to other states that have a higher base salary for similar positions.
Having internal investment managers saves RIO about $17 million per year for internally managing 15% of the state's assets, Smith said.
Ostlie, who spoke in favor of the bill, said the incentive compensation program that was approved by the State Investment Board was different from what he recalled would happen.
"When I asked many other legislators for clarification of this, they couldn't remember this either and/or they said that it probably should have maybe been vetted just a little bit more," he said.
Steiner said she agrees with Ostlie and was also surprised about the details of the incentive compensation program.
"I didn't realize that it was that extensive," she said. "I remember when we talked about it, I thought it was just going to be a couple of fund managers that we had to incentivize just like the private market, and it's much larger than that, so it's definitely a concern."
Rep. Keith Kempenich, R-Bowman, who spoke against HB 1348, said the communication between legislators about the incentive compensation program could have been better.
"I'm not going to argue that point," he said.
Ostlie said the incentive compensation program should be repealed and replaced with a new one that is vetted by the Legislature. He said Gov. Kelly Armstrong is now the new chair the State Investment Board.
"It would allow their input into this process, and then also the full legislative body here would have maybe a little more input than what we had the last time or if nothing changes, at least we are a little bit more aware of what we did," he said.
Smith said the State Investment Board should get an opportunity to fix the incentive compensation program. She said Armstrong asked for a review of the program.
"Allow them that opportunity because you can see the State Investment Board, and this is in the policy, reserves the right to modify, terminate and or rescind any or all of the compensation schedules, provisions, policies and procedures contained in this and supporting documents at any time," she said.
Ostlie said about 20 positions that were declassified are eligible for the incentive compensation program, including the executive director and chief investment officer.
"I do not believe that all of these other classes of employees were intended by the last Legislature to be on this new comp plan," he said.
He said he understands the need to declassify some RIO employees from the state employee classification system.
"Everybody I talked to thought the list was expanded quite a bit larger than what was intended," he said.
Section 3 of SB 2022 during the 2023 legislative session amended North Dakota Century Code Section 54-44.3-20 to exempt investment and fiscal operations positions of the Retirement and Investment Office staff from the state employee classification system.
Smith said the original intent was to reclassify those employees and put them at a higher level of classification.
"They were denied those reclassifications to be able to bring their salary levels up because they have a very specialized skill set within the agency," she said. "So the agency's response to being able to bring on the team members at the level that we need to bring them on then was to unclassify them."
State Treasurer Thomas Beadle, who spoke against the bill, said there was opposition to the incentive compensation program on the State Investment Board when it got approved.
"Primarily a couple of other agency heads to serve on the state investment board," he said. "They were concerned that they might lose fiscal staff who might think that this is more attractive and they want to jump shift to a different agency, so they dissented in their votes."
The State Investment Board approved in a 10-3 vote the incentive compensation program in February. Board members Adam Miller, Joe Morrissette, who is the director for the North Dakota Office of Management and Budget, and Susan Sisk were opposed.
The incentive compensation plan allows more than just the investment advisers to be eligible for the plan and includes the executive director and the fiscal team of the Retirement and Investment Office, Morrissette told The Jamestown Sun in November. All employees in RIO are not eligible for the plan, he said.
He also told The Sun that he was against the structure of the bonus system because the plan awards a bonus at one basis point of performance that exceeds the benchmark.
"A basis point is a 100th of a percent," he said. "That seemed like too small of a margin for me. I felt like there should be a larger gap between the benchmark and what our performance is before we started awarding bonuses."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
3 days ago
- Yahoo
Brazilian military simulates security drill ahead of BRICS summit in Rio de Janeiro
Brazil's military conducted a security drill on Tuesday in Rio de Janeiro in preparation for the BRICS Summit, which will take place in the city in early July. (AP/ Mario Lobao)
Yahoo
6 days ago
- Yahoo
Brazil's new Rio stock exchange to start operations later than expected
RIO DE JANEIRO (Reuters) -A Rio de Janeiro-based stock exchange is expected to begin operations by the end of April 2026, the executive leading the project said on Monday, a delay from initial projections. The new bourse, called Base Exchange and controlled by Abu Dhabi's Mubadala, could shift Brazil's financial landscape, as Sao Paulo-based stock exchange B3 currently reigns in the Brazilian market. Claudio Pracownik, CEO at Rio de Janeiro's Base Exchange, told Reuters the revised timeline reflects regulatory processes. Previously, operations were expected to start this year. Tests for the new exchange have been conducted at the Brazilian securities watchdog CVM, while simulations at the central bank are expected to take place by August, according to Pracownik, who expects to receive the necessary regulatory authorizations by the end of the year. Base hopes to compete with B3 by using different technology and operating at lower cost, he said. "We are proposing to do better, faster and cheaper." B3 did not immediately respond to a request for comment. Pracownik said he has already spoken with representatives of the main companies whose shares trade on B3, and that they showed interest in also trading their shares on the Rio de Janeiro exchange. "These companies have nothing to lose. Petrobras, Vale, Banco do Brasil and others expressed interest in trading," said Pracownik. Banco do Brasil and Petrobras did not immediately respond to requests for comment. Vale declined to comment. The new exchange, which would initially trade assets such as equities, intends to launch new products every eight to nine months, including derivatives and options, to be able to compete with B3, Pracownik added.
Business Wire
13-06-2025
- Business Wire
EY US announces Gabriel Rio of Milestone Environmental Services as an Entrepreneur Of The Year ® 2025 Gulf South Award Winner
HOUSTON--(BUSINESS WIRE)--Ernst & Young LLP (EY US) today announced that Gabriel Rio, President and CEO of Milestone Environmental Services, LLC, ('Milestone'), a leading environmental infrastructure company, was named an Entrepreneur Of The Year 2025 Gulf South Award winner. Entrepreneur Of The Year is the preeminent competitive awards program for entrepreneurs and leaders of high-growth companies. For 40 years, EY US has celebrated ambitious entrepreneurs who are transforming industries, impacting communities and creating long-term value. Mr. Rio was chosen by an independent panel of past winners, top CEOs, and business leaders. Judges assessed candidates on long-term value creation, entrepreneurial spirit, purpose-driven commitment, and significant growth and impact. 'It is an honor to receive this prestigious award. This achievement would not have been possible without the people that have persevered with me over the years - my incredible team, partners, mentors, and most of all my family - I'm grateful to share this award with them. Together, we have built a company that is not only transforming waste management but also driving meaningful environmental progress for our clients across critical sectors,' said Mr. Rio. 'At Milestone, we are committed to delivering reliable, cost-effective, end-to-end waste management solutions with agility and flexibility, enabling our customers to achieve their environmental goals while mitigating risk. Building on our strong legacy and deep expertise in energy waste solutions, we are expanding into industrial waste management and carbon solutions, further cementing our commitment to sustainable growth and leadership in the environmental infrastructure sector.' As a Gulf South award winner, Mr. Rio is now eligible for consideration for the Entrepreneur Of The Year 2025 National Awards. The National Award winners, including the Entrepreneur Of The Year National Overall Award winner, will be announced in November at the Strategic Growth Forum ®, one of the nation's most prestigious gatherings of high-growth, market-leading companies. The Entrepreneur Of The Year National Overall Award winner will then move on to compete for the EY World Entrepreneur Of The Year™ Award in June 2026. Entrepreneur Of The Year recognizes many different types of business leaders for their ingenuity, courage and entrepreneurial spirit. The program celebrates original founders who bootstrapped their business from inception or who raised outside capital to grow their company; transformational CEOs who infused innovation into an existing organization to catapult its trajectory; and multigenerational family business leaders who reimagined a legacy business model to strengthen it for the future. The Entrepreneur Of The Year program has recognized the leadership of entrepreneurs such as: Sheila Mikhail of AskBio Caryn Seidman Becker and Ken Cornick of CLEAR James Park of Fitbit Arthur Blank of The Home Depot Kendra Scott of Kendra Scott LLC Reed Hoffman and Jeff Weiner of LinkedIn Saiju Jeong of Noom Howard Schultz of Starbucks Coffee Company Jodi Berg of Vitamix Michael Happe of Winnebago Industries Amanda Baldwin and Holly Thaggard of Supergoop! About Entrepreneur Of The Year Founded in 1986, Entrepreneur Of The Year has celebrated more than 11,000 ambitious visionaries who are leading successful, dynamic businesses in the US, and it has since expanded to nearly 60 countries globally. The US program consists of 17 regional programs whose panels of independent judges select the regional award winners every June. Those winners compete for national recognition at the Strategic Growth Forum ® in November where National finalists and award winners are announced. The overall National winner represents the US at the EY World Entrepreneur Of The Year™ competition. Visit About EY EY is building a better working world by creating new value for clients, people, society and the planet, while building trust in capital markets. Enabled by data, AI and advanced technology, EY teams help clients shape the future with confidence and develop answers for the most pressing issues of today and tomorrow. EY teams work across a full spectrum of services in assurance, consulting, tax, strategy and transactions. Fueled by sector insights, a globally connected, multi-disciplinary network and diverse ecosystem partners, EY teams can provide services in more than 150 countries and territories. All in to shape the future with confidence. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation are available via EY member firms do not practice law where prohibited by local laws. For more information about our organization, please visit About Milestone Environmental Services Milestone is a leading environmental infrastructure company delivering reliable, safe, and disciplined waste management solutions to help businesses across critical sectors in the United States mitigate risk and achieve their environmental goals. Milestone operates the largest slurry injection network in the U.S., using advanced proprietary technology to permanently secure waste. Since 2014, Milestone has captured more than 3 million tons of CO 2 e through its injection process, driving meaningful environmental progress for its clients. Building on its expertise in energy waste, Milestone is expanding into industrial waste management and carbon solutions to support sustainable growth. Milestone is a portfolio company of SK Capital Partners, a sector-focused, growth-oriented private investment firm with extensive operating, ownership, and investment experience.
