Tuesday, Oct 25, 2022 – Posted by Rich Miller
* From TRS…
For the second straight year, the long-term funded ratio of Teachers’ Retirement System has improved, reaching 43.8% at the end of fiscal year 2022. That is a positive increase of 1.3% over the previous year’s funded status.
The TRS Board of Trustees gave preliminary approval to a $6.04 billion state government contribution for the System in FY 2024. That is a 2.5% increase over the state’s $5.89 billion contribution for the current fiscal year.
The increase in the funded ratio came last year despite very volatile investment markets and uncertainty in the world economy. Most large institutional investors like TRS lost money during FY 2022. TRS recorded an investment return rate of -1.17%. Nonetheless, the TRS rate compared favorably to the median return of -7.6% by large pension systems according to RVK, Inc., of Portland, Oregon, the TRS general investment consultant.
“The System’s improved funded ratio is a bright spot in a challenging investment year,” said Stan Rupnik, executive director and chief investment officer of TRS. “The TRS funded ratio improved this year primarily because of consistently positive investment returns over the last five years combined with steady state funding that for two years exceeded the statutory minimum.
“The System’s five-year annualized TRS investment return exceeds 7%, and those gains outweigh the small negative return in FY 2022,” he added. “Increased funding from state contributions and strong investment returns slows the growth of the unfunded liability and over the last two years has slightly improved the funded ratio.”
The total unfunded liability of TRS at the end of FY 2022 was $80.6 billion; a 0.85% increase over the $79.9 billion unfunded liability recorded in FY 2021, according to the System’s annual actuarial valuation, compiled by Segal Consultants, of Chicago.
In the last decade, the TRS funded ratio averaged 40.7 percent. Projections by Segal show slow but steady improvements in the funded ratio between FY 2022 and FY 2045, when state law requires TRS to have a funded ratio of 90 percent. The funded ratio at the end of FY 2021 was 42.5%. During the last two years, the TRS funded ratio has improved by 3.3%.
The funded ratio reflects the difference in the amount of money TRS has in assets against the amount of money the System needs to immediately pay all members the full amounts of benefits they are owed for the rest of time. Altogether, the System’s total long-term liability at the end of FY 2022 was $143.5 billion, a 3.3 percent increase over the previous year.
While the funded ratio is important as an official measure of the System’s long-term fiscal health, it is not a reflection of the System’s current financial ability to pay benefits. In any given year, TRS only is obligated under state law to pay out the amount of money owed annually to eligible retired members and other beneficiaries. During FY 2022, paid benefits totaled $7.6 billion. TRS was more than able to pay all benefits for the year on time and in full. In fact, for 83 years TRS has paid all benefits in full and on time.
* That 2.5 percent increase works out to $150 million. These are fiscal year over fiscal year state funding increases for TRS via COGFA…
2012-13 +12.3% (+$296.9 mil)
2013-14 +27.2% (+$735.1 mil)
2014-15 -1.8% (-$60.7 mil)
2015-16 +10.8% (+$364.8 mil)
2016-17 +6.5% (+$243.9 mil)
2017-18 +2.7% (+$108.7 mil)
2018-19 +9.1% (+$370.9 mil)
2019-20 +7.8% (+$347.5 mil)
2020-21 +6.8% (+$327.1 mil)
Many thanks to Isabel for running those numbers.
via Capitol Fax.com http://capitolfax.com
October 25, 2022 at 02:15PM