Thursday, May 30, 2024

Investment losses hit Louisiana pension system for a $1B loss as liability increases by $600M

by BIZ Magazine
crumpled dollars

By Victor Skinner | The Center Square contributor

The Louisiana State Employees’ Retirement System lost $1 billion in investments last year, as the plan’s unfunded liabilities increased $600 million, according to an independent auditor’s report.

The Louisiana Legislative Auditor issued a contracted audit report for LASERS last month that shows the total pension liability for the system stood at $20.8 billion on June 30, 2022, up from $20.2 billion on the same day in 2021.

The liability increased $600 million as the net position restricted for pensions dropped by $1.5 billion, from about $14.7 billion in 2021 to $13.2 billion in 2022.

“This decrease can be attributed to a decrease in investments of $1,514,029,005 caused by increased market volatility triggered by inflationary pressures,” according to the report.

The decrease followed a roughly $3.3 billion net increase between 2020 and 2021, which was “attributed to market recovery realized from a combination of federal stimulus and vaccine development in response to the COVID-19 pandemic …,” the report reads.

Total contributions to LASERS increased by 0.3% or $2.8 million to $1 billion in 2022, as benefit payments increased by $52.8 million or 3.8% to $1.4 billion.

The total revenue for fiscal year 2022 was $22,794,609, which consisted of the employer and employee contributions, a net investment loss of $1.015 million, and other income of $15.8 million.

“In 2022, our investment portfolio completed the fiscal year with a rate of return-on-investment assets of -7.2%. The plan earned an annualized return of 12.2% for the two year period, 8.2% for the six-year period, and 7.8% for the ten-year period,” according to the report.

Deductions for the 2022 fiscal year totaled $1.5 billion, increasing about 4% from 2021, while the fiscal year 2021 deductions totaled $1.44 billion, or about 1.9% over 2020.

“The increase in deductions for fiscal years ended 2022 and 2021 is primarily a result of an increase in benefits,” auditors wrote. “Benefits paid in 2022, 2021, and 2020 increased because of the increase in the number of retirees and the average benefit resulting from the higher average salary history of the newer retirees.”

Administrative expenses also increased by $103,624 or 0.6% for fiscal year 2022, compared to a decrease of $142,671 or .9% in 2021.

“The decrease in 2021 is because of reduced travel due to the COVID-19 pandemic,” according to the report.

“Total additions less total deductions resulted in a net decrease in fiduciary net position of $1,477,764,627 in 2022, compared to an increase of $3,295,633,872 in 2021,” auditors wrote.

The report shows the total number of active employers in the system increased from 341 in 2021 to 348 in 2022, while the total number of active members decreased from 38,572 to 37,358.

As of June 30, 2022, total membership in LASERS stood at 151,318, or 712 total members more than at the same time in 2021. Retirees now outnumber regular active members by 4,320.

You may also like

Update Required Flash plugin