Tag: investment income

Illinois Pension Contributions To Rise By $700 Million in 2015

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Illinois’ payments to its pension systems will jump by almost $700 million in 2015 after three of its state-level systems lowered their assumed rates of return.

From the Journal-Standard:

The total state contribution to the five state-funded pension systems next year is $7.537 billion. That’s an increase of more than $680 million over the amount the state had to contribute to the systems in the current fiscal year.

The numbers are compiled by the pension systems, but were reviewed and contained in a report by the state actuary issued Wednesday by Auditor General William Holland’s office.

The increase for next year’s budget is sharply higher than the increase in the current state budget. This year, lawmakers only needed to find an additional $100 million to meet the pension obligations. It was the smallest increase in years after a series of $1 billion hikes.

No reason was identified for the increase, although the report did note that three of the five systems lowered the estimated rate of return they expect to receive on their investments. Pension systems get their money through employee contributions, state contributions and investment income. When the systems expect to make less on their investments, the difference is usually made up with higher state contributions.

Cheiron, the state’s actuary, said last year it thought the three biggest pension systems were being overly optimistic about how much investment income they could earn. Since then, the Teachers Retirement System, State Universities Retirement System and State Employees Retirement system, all cut their expected rate of return on investments.

The Judges Retirement System and General Assembly Retirement System had previously cut their estimates.

Illinois shoulders approximately $111 billion in pension debt.

Virginia Pension Funding Improves For First Time in 5 Years

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The five major pension plans that fall under the umbrella of the Virginia Retirement Systems (VRS) all improved their funding statuses in fiscal year 2013-14, according to the state’s actuary.

It was the first funding improvement for VRS since 2008. More from the Times-Dispatch:

The state employee plan was 67.9 percent funded on June 30, up from 65.1 percent the previous year, and the teachers plan rose to 65.4 percent from 62.1 percent, based on an actuarial calculation that smooths gains and losses over five years.

Based on current market value, both plans were funded at more than 74 and 71 percent, respectively, at the end of the last fiscal year.

The improved funded status reflects a 15.7 percent increase in investment income in the last fiscal year for the $65 billion retirement system and potentially reduces pressure on contributions that state and local governments and school systems must make to pension plans for more than 600,000 active, retired and inactive employees.

“For us, what’s important is the trend is in the right direction,” said Jose I. Fernandez, principal and consulting actuary for Cavanaugh Macdonald Consulting, LLC, which advises the VRS on the rates necessary to fund current retirement costs and long-term liabilities for public employees.

Part of the reason for the funding improvement: the state began paying back $1.1 billion dollars in missed pension payments. From the Times-Dispatch:

The analysis also reflects the required payback of $1.1 billion in deferred state and local pension contributions in the 2010-12 budget. The state has repaid about $250 million of the deferred obligations with interest, but will owe about $851 million over the next seven years.

The net result was a reduction in the system’s unfunded liabilities from almost $24 billion a year ago to about $22.6 billion now. The liability falls by almost $858 million for the teachers plan, the largest retirement plan with about 147,000 active employees and more than 81,000 retirees. But the plan still had an unfunded liability of about $14.3 billion on June 30.

VRS manages $65 billion of assets.

 

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