A strong stock market helped the investments of two of the state's smaller public retirement systems grow sharply in value in the fiscal year that ended June 30.
The value of the Arkansas State Highway Employees Retirement System's investments increased by $49 million to $1.35 billion and showed a return on investments of 11.21 percent in fiscal 2017, said Robyn Smith, the system's executive secretary. The fiscal year ended June 30.
The Arkansas Judicial Retirement System's investments rose in value by $25 million to $240.9 million in the fiscal year, with a return on investment of 13.35 percent, according to its Chicago-based investment consultant Callan Associates.
The Arkansas Highway Employees Retirement System and Arkansas Judicial Retirement System are two of several state government retirement systems.
The largest is the Arkansas Teacher Retirement System with more than 100,000 working and retired members and more than $14 billion in investments.
HIGHWAY EMPLOYEES
The highway workers' retirement system investment portfolio "performed in line with expectations given the market's performance," Smith said. "The market had a good year."
The system's stock market investments totaled $1.026 billion on June 30, while its bond investments ended up valued at $267.9 million, she said. The system's investments also included cash.
The median return for public retirement systems of at least $100 million was 12.42 percent in fiscal 2017, based on information from Chicago-based investment consultant CastleArk, Smith said Tuesday. The highway employees' system return was 11.21 percent.
The highway employee retirement system included 3,406 working members with an average annual salary of $41,664 and 2,371 retired members with an average annual benefit of $32,795 as of June 30, 2016, based on the system's latest actuarial report, Smith said. The system also included 405 members who retired based on a disability, with an average annual benefit of $16,588, and 525 beneficiaries with an average annual benefit of $14,625, she said.
The state paid $19.1 million and employees paid $9.1 million into the system in fiscal 2017, according to Smith. The system paid out $111.9 million in benefits and refunds last fiscal year, she said.
The system's unfunded liabilities totaled $241.9 million as of June 30, 2016, based on its latest actuarial report with a projected "infinite" payoff period, she said. The system's unfunded liabilities are the amount by which the system's liabilities fall short of an actuarial value of the system's assets. Actuaries often compare unfunded liabilities to a mortgage on a house.
"The 2016 data does not reflect any changes with respect to what happened during the legislative session and the change in the [cost-of-living adjustment] calculation that was passed," she said.
During this year's regular session, the Legislature and Gov. Asa Hutchinson enacted a law that changed the annual fixed 3 percent cost-of-living increase for retired state highway employees to the lesser of 3 percent or the change in the consumer price index for urban wage and clerical workers. The move was aimed at reducing the system's unfunded liabilities and moving the system's projected payoff for its unfunded liabilities within 30 years.
The system's actuarial report for fiscal 2017 will be available later in the fall, Smith said. The system assumes an 8 percent annual investment return and is waiting to see its actuarial report before considering taking other steps such as reducing that assumption, she said.
JUDICIAL RETIREMENT
The judicial retirement system's investment performance was "very good," its executive director, Gail Stone, said Tuesday.
Callan Associates, the judicial system's consultant, reported that the median return for public retirement systems valued at between $100 million and $1 billion was 12.50 percent last fiscal year. The judicial retirement system's return was 13.35 percent.
The judicial employee system's domestic stock market investments totaled $96.1 million at the end of the fiscal year, while its international stock market investments reached $37.1 million, Callan reported. Bond investments totaled $86.2 million and the system's real estate investments were valued at $21.1 million on June 30, according to Callan Associates. The system's investments also included cash.
The judicial retirement system included 139 working members with an average annual salary of $160,489 and 138 retired members with an average annual benefit of $86,752 as of June 30, 2016, based on its latest actuarial report from Gabriel, Roeder, Smith & Co. Stone said the system's actuarial report for fiscal 2017 will be available this fall.
The state paid $7.8 million into the system in fiscal 2017, while system members contributed $1 million and court fees provided about $586,000, according to a system report. The system paid out $12.3 million in retirement benefits last fiscal year.
As of June 30, 2016, the system's unfunded liabilities totaled $35.3 million with a projected payoff period of 27 years, Stone said. In May, the system's board of trustees voted to reduce its projected investment return in the future from 6.5 percent to 5.75 for its June 30, 2017, actuarial valuation, she said.
Actuaries have advised some state government retirement systems to reduce their projections for future returns, citing lower projections from some investment consultants.
Metro on 09/02/2017