SBCSS News and Press Releases

Public School Employee Investments to be Made Whole

2005-01-11

SAN BERNARDINO — County Superintendent of Schools Herbert Fischer announced today that his office, collectively with participating school districts, would voluntarily make whole investments that were not deposited in public school employee supplemental retirement accounts by National Employees Benefit Services (NEBS).

The County Schools office was notified in late October by NEBS, the company that had served as the common remitter of 403(b) investment accounts for about 11,800 public school employees in San Bernardino County, that some participants’ contributions were not deposited in their accounts. An investigation by NEBS determined that a former executive of the company misappropriated funds. This included roughly $1.4 million in deposits by more than 2,400 employees in 16 county school districts.

In December, the County Schools office was notified that NEBS filed for Chapter 7 bankruptcy.

“We had been assured by NEBS that the insurance bond we held with the company would cover the lost deposits of county public school employees, but once we were informed of the bankruptcy, we knew we had to find a way to see that our public school employees’ investments were made whole as quickly as possible,” said Fischer.

“Working with the superintendents of the districts impacted by NEBS and our legal counsel, we set up a consistent mechanism countywide for districts to make whole the lost deposits of any employees impacted by the NEBS mishandling of employee investment funds.”

Gary Thomas, assistant superintendent of Business Services for County Schools, explained that affected employees will be given the option to assign their lost principal and calculated lost interest back to the district through a claims process. The County Schools office and school districts will deposit the amount of lost assets in participating employees’ investment accounts. Once the bankruptcy proceeding is resolved, districts and the County Schools office would seek to recoup those funds.

Thomas added that because each of the school districts contracted independently with NEBS, proceeding in this manner would require district governing board action. Legal counsel has prepared the appropriate documentation and resolutions for districts to take to their governing boards.

“We knew the bankruptcy process could be long and tedious. The district superintendents felt strongly that their employees should not be put through a lengthy claims process in order to see their investments returned,” Fischer noted.

“We believe it is in the best interest of the school districts and the public school employees of this county to proceed in this manner. I appreciate the cooperation and commitment of district leadership to resolve this issue.”

Teachers and employees in 31 K-12 school districts, four community college districts and San Bernardino County Superintendent of Schools contributed about $5.3 million a month as part of their 403(b) through NEBS. Since the November payroll, the County Schools office has directly issued deposits to employee investment accounts. As requested by the district business officials, Fischer’s office is working diligently to identify another common system to serve employee and district needs in the selection and protection of investment funds.