State Pension Fund Releases 2016 Financial Report

Aug 8, 2017

One of the state’s two largest pension funds has released its financial report for 2016.

The State Employees Retirement System—or SERS—continued a longstanding pattern last year of coming up short of projected long-term earnings.

It brought in $1.6 billion in 2016. That constitutes a 6.5 percent return, and spokeswoman Pamela Hile said that “when talking about an underfunded pension system, that is very good news.”

But it’s still less than the rate of return SERS assumes for its investments—7.25 percent. It’s important to meet that number on average, because otherwise, liabilities can’t be correctly calculated, which can allow chronic under-funding.

Richard Dreyfuss, an actuary who closely tracks Pennsylvania’s pension systems, said he thinks the returns SERS is expecting are too high.

“I think we’re in for some difficult times ahead, candidly, just because of our mounting fiscal deficits, plus the prospect of increasing interest rates,” he said. “So I think it’s going to be hard to earn 7 and a quarter percent under any scenario.”

The report shows SERS’s asset-to-liability ratio is just over 58 percent.

“It’s not a healthy sign,” Dreyfuss said. “It’s certainly not where we should be or want to be.”

Generally, pension plans are considered healthy at an 80 percent ratio.

Altogether, Pennsylvania’s pension system has roughly $70 billion in unfunded overhead costs.One of the state’s two largest pension funds has released its financial report for 2016.

The State Employees Retirement System—or SERS—continued a longstanding pattern last year of coming up short of projected long-term earnings.

It brought in $1.6 billion dollars in 2016. That constitutes a 6.5 percent return, and spokeswoman Pamela Hile said that “when talking about an underfunded pension system, that is very good news.”

But it’s still less than the rate of return SERS assumes for its investments—7.25 percent. It’s important to meet that number on average, because otherwise, liabilities can’t be correctly calculated, which can allow chronic under-funding.

Richard Dreyfuss, an actuary who closely tracks Pennsylvania’s pension systems, said he thinks the returns SERS is expecting are too high.

“I think we’re in for some difficult times ahead, candidly, just because of our mounting fiscal deficits, plus the prospect of increasing interest rates,” he said. “So I think it’s going to be hard to earn 7 and a quarter percent under any scenario.”

The report shows SERS’s asset-to-liability ratio is just over 58 percent.

“It’s not a healthy sign,” Dreyfuss said. “It’s certainly not where we should be or want to be.”

Generally, pension plans are considered healthy at an 80 percent ratio.

Altogether, Pennsylvania’s pension system has roughly $70 billion in unfunded overhead costs.