Saturday, April 20, 2024

Two smaller state-run pension funds report solid financials despite downturn

by BIZ Magazine

By Victor Skinner | The Center Square contributor

Retirement systems for Louisiana assessors and parochial employees remain strong despite declines in market returns in 2022, according to valuations presented this week.

Actuary Greg Curran told the Louisiana Public Retirement Systems’ Actuarial Committee on Monday that both the active and retired membership of the Louisiana Assessors’ Retirement Fund remained level in 2022, while payroll and benefits and payments increased.

The fund has an accrued liability of $520 million, with $503 million in assets, “leaving us a funded ratio … of 96.73%, up from last year just a little,” Curran said.

The increase came despite a negative 15% market return in 2022. Smoothed over five years, the rate of return stood at 4.3%, or about 1.2% below the assumed rate of return.

The system utilizes a funding deposit account by asking employers to pay above the minimum contribution to fund cost of living increases.

That account has a balance of $49 million, with $998,000 added to the account and nothing expended in 2022.

“A (cost of living increase) is to be added at October 1 of the coming year, so next year we’ll show a reduction from the funding deposit account,” Curran said.

The assessors retirement board plans to continue to adopt an actual employer contribution rate above the 3% minimum to replenish the funds, he said.

The Parochial Employees’ Retirement System’s two plans are more than100% funded.

Plan A’s active membership declined slightly, and retired membership increased slightly, while payroll was also up for the year. Benefits and payments to Plan A totaled $225 million in 2022, up from $211 million the year prior, Curran said.

With accrued liabilities of $4.6 billion and assets of $4.7 billion, Plan A is 102.19% funded.

“That is down slightly for the year before, … because of the market returns, but this plan has been well-funded and resilient for years,” Curran said.

Plan A had a market rate of return of negative 12.1% in 2022, while its funding deposit account stood at $65.2 million. The actuarial rate of return over five years was 4.8%, below the assumed rate of return of 6.4%. The plan has a 7.5% minimum employer contribution, but the plan’s board will require employers to pay 11.5% to build up the funding deposit account to provide cost of living increases.

The funding deposit account paid out a $40.4 million cost of living increase in 2022, with $31.2 million deposited into the fund.

Plan B under the parochial system followed a similar pattern in 2022, with active membership down, retired membership up, and a funded ratio of 104.7%. Plan B’s market rate of return was negative 12.1%, with a smoothed rate of return over five years at 4.8%, also below the assumed return of 6.4%.

“You wind up with a 5.25% minimum employer rate, up from last year’s 5%, but the board has collected for a number of years 7.5% and that gives them a margin to put money away into that funding deposit account, which stands at $5.7 million,” Curran said.

Plan B spent $3 million on a cost of living increase in 2022, he said, but the amount contributed to the funding deposit account exceeded that cost, he said.

“So the plan’s funding deposit account actually grew over the last year,” Curran said.

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