November 13, 2014
“TRS, Other State Retirement Systems Continue Funding Improvement”
OREA has been the out front advocate for the last two years in touting the significant funding improvement of the Teachers’ Retirement System. Among the many pieces of mounting evidence supporting our position, annual actuarial reports for the system in 2013 and again this year have painted a clear picture of a massive state retirement system – long the butt of public criticism and jokes for its low funding level – getting healthier and healthier every day.
Often feeling alone in our quest to tell the truth about TRS, we’re now getting some help – from all the right folks.
Support for our positive TRS view came Wednesday, November 12, from reports and testimony submitted to the House Economic Development and Financial Services Committee, which is conducting its annual review of the fiscal health of the state’s retirement systems.
Committee Chair Randy McDaniel, respected for his knowledge and leadership on retirement issues in the legislature, acknowledged in prepared remarks that all of the state’s six defined benefit retirement systems for a variety of state and local government employees have made strong financial progress in the last three years.
McDaniel noted that, in the aggregate, the funding level for the systems in 2011 was 58%. In 2014, the funding level has risen to 74%. System unfunded liabilities – standing at more than $16 billion in 2011 – have been reduced to less than $10 billion, with actuarial reports for all the systems indicating solid plans in place to achieve 100% funding within a reasonable number of years.
The prize pupil among all the systems has to be the Teachers’ Retirement System. The last two annual actuarial reports describe amazing growth in system assets, achieved through effective management, trustee leadership, and exceptional investment practices. The system’s funding level has increased by almost 10% in the last two years, and projections indicate it can achieve 100% funding in as few as 11 years. That’s a far cry from the “infinity” funding projection of a few years back.
While TRS liabilities have grown – as expected – with the addition of new retirees each year, system assets have grown even more dramatically. In fiscal year 2014, TRS erased almost $1 billion in liabilities from its books, with an increase of approximately $1.5 billion in actuarial value of assets. The current funding level of 63.2%, while impressive in its own right, would be 72.7% if based on market, rather than actuarial, value of assets.
There is much good news to share about TRS progress, but we don’t want to get carried away. Achieving a well-funded system capable of serving retired and active educators for the long haul has some distance to go, but it’s good to know we’re on smoother road with our GPS telling us where we’re headed.
Is it time to tell your state legislators not to mess with success?