MTPR

State Pensions Show Healthy Growth This Year, Managers Say

Dec 11, 2017

Montana’s largest public pension funds Monday reported greater than expected returns on investments this year. But moving forward, one of them isn’t expecting such high returns to continue.

Both the Public Employees Retirement System and the Teachers Retirement System saw investment returns slightly higher than the 7.75 percent their investment managers expected.

However, at a Legislative Finance Committee hearing Monday, PERS director Dore Schwinden told lawmakers that that retirement fund went slightly backwards in terms of having enough money to cover the cost of all anticipated retirements. That funding ratio went from being able to cover around 76 percent of those retirement costs down to 72 percent.

Schwinden says the state appears further behind, because managers of the state’s largest pension fund predict less wage growth and a tick lower return on investments in the coming years.

"The 2017 decrease in funding ratio is the direct result of adopting more conservative economic assumptions," Schwinden says.

PERS investment managers predict that fund to have enough cash in the bank to cover the costs of expected retirees in 30 years.

The fund’s yearly investment return has fallen below S&P market returns since 1995, but with less severe ups and downs, according to a report from the Montana State Board of investments.

The teacher’s retirement fund, meanwhile, reports that that system is closer to getting to being fully funded. It can now cover just over 70 percent of expected retirement costs, and should be fully funded in 22 years, manager say.

See the 2016 Board of Investments annual report here: http://investmentmt.com/Portals/96/shared/AnnualReport/docs/FY2016Final.pdf