Pension system return at 5.59%

The Arkansas Public Employees Retirement System’s investments increased in value by $282 million to $6.1 billion in the quarter that ended Sept. 30, the system’s trustees learned Wednesday.

The system’s investment return was 5.59 percent for the quarter, investment consultant Callan Associates Inc. of Chicago said in a report to the system’s trustees.

The return was 19.89 percent for the year ended Sept. 30 - ranking among the top 17 percent of the nation’s public retirement systems - and 1.96 percent a year over the past five years - ranking among the bottom 39 percent of these retirement systems - Callan Associates said in its report.

Afterward, system Executive Director Gail Stone estimated the system’s investments are still valued at roughly $6.1 billion, after their stock market gains and losses since Sept. 30.

The system’s unfunded liabilities totaled $2.5 billion on June 30, said Mita Drazilov of system actuary Gabriel, Roeder, Smith & Co. of Southfield, Mich.

Unfunded liabilities are the amount by which the system’s liabilities exceed an actuarial value of its assets. A 30-year payoff period is projected for the system’s current level of unfunded liabilities. Actuaries often compare unfunded liabilities to a home mortgage.

The system includes 45,937 working members with an average annual sal-ary of $34,962 and 27,536 retired members with total annual benefits of $346 million (an average annual benefit of $12,565), Gabriel, Roeder, Smith & Co. reported.

The trustees on Wednesday also reaffirmed their decision in August to increase the rate the system charges state and local government from 14.24 percent of employee payroll to 14.88 percent, effective July 1, 2013.

It’s the fourth-consecutive year that the trustees have voted to increase this rate.

The latest increase was necessary because the value of the system’s investments dropped 0.33 percent during the last fiscal year, Drazilov said.

In fiscal 2009, the system’s investments plummeted about $1.3 billion in value to $4.3 billion amid a recession and stock market downturn. In fiscal 2010, the system charged state and local governments 11 percent of employee payroll.

The system is expected to receive about $270 million from state and local governments in fiscal 2014, up from $250 million in the current fiscal year, Drazilov said.

Artee Williams, chairman of the system’s board of trustees, said the trustees have postponed discussions about proposed legislative changes until February.

“We won’t have a board [legislative] package,” for the system for the 2013 session, Stone explained afterward.

“I don’t think there is a burning need to do that,” she said.

Stone said the system’s retired members get an average of about $12,000 a year in retirement benefits, and their benefit levels aren’t overly generous.

In August, the trustees instructed their actuaries to estimate cost savings for possible legislative changes, in case lawmakers try to lower the rate they charge to 12 percent of employee payroll, in order to show the possible effects of such changes.

The options included increasing the minimum age or the minimum number of years of service required for members to receive full benefits, and increasing the number of years of the members’ highest salaries on which retirement benefits are determined, and to study the adequacy of the system’s retirement benefits.

So far, no lawmakers have stepped forward to demand rate cuts.