·
During
Fiscal Year 2011, members contributed 9.4 percent of gross creditable earnings:
7.5 percent for retirement annuity, 0.5 percent for post-retirement increases,
0.4 percent for the Early Retirement Option, and 1 percent for death benefits.
·
Active
members do not contribute to Social Security for TRS-covered employment;
however, members hired after March 31, 1986 are required to contribute to
Medicare. In addition, virtually all members pay a contribution to the
Teachers’ Health Insurance Security Fund, a separate fund in the State Treasury
that is not a part of this retirement plan. For FY11, the member contribution
was 0.88 percent of pay. (Only six states have a higher teacher pension contribution rate
than the 9.4 percent TRS members pay: Kentucky, Missouri, Nevada, Ohio, Rhode
Island, and Vermont).
·
Pensions paid to
Teachers’ Retirement System members recirculate throughout the Illinois
economy, creating more than 30,000 jobs in the state with a total payroll of
more than $1.1 billion. TRS pensions enable thousands of men and women to lead
fulfilling and secure lives in retirement.
·
The
Teachers’ Retirement System of the State of Illinois had a statewide economic
impact of $4.3 billion in fiscal year 2011.
·
The
actuarial value of assets at year end was $37.8 billion, and the actuarial
accrued liability was $81.3 billion. The decline in the funded ratio was due to
an increase in the liability and the continued phase-in of 2009 investment
losses in the calculation of the actuarial value of assets. Due to the
five-year “smoothing” methodology required by Public Act 96-0043, the actuarial
value of assets now recognizes 60 percent of the 2009 losses, 40 percent of the
2010 gains, and 20 percent of the 2011 gains.
• Contributions from
members, employers, and the state were $3,236 million, an increase of $84 million or 2.7 percent for the
fiscal year.
• Total investment
gain was $7,235 million, compared to investment gain of $3,680 million in FY10,
for an increase of $3,555 million.
• Benefits and refunds
paid to members and annuitants were $4,305 million, an increase of $317 million
or 7.9 percent compared to FY10.
• The unfunded
actuarial accrued liability increased from $39.9 billion on June 30, 2010 to
$43.5 billion on June 30, 2011. The funded ratio decreased from 48.4 percent on
June 30, 2010 to 46.5 percent on June 30, 2011. The unfunded liability and
funded ratio for both years are calculated using a smoothed value of assets, as
required under Public Act 96-0043.
·
TRS was created to provide retirement, survivor, and
disability benefits to qualified members. Increases or decreases in plan net
assets serve as useful indicators of TRS’s financial position. Net assets
available to pay benefits were $37.5 billion and $31.3 billion at June 30, 2011
and 2010, respectively. Net assets increased $6.1 billion and $2.8 billion during FY11 and
FY10, respectively.
·
Retirement,
survivor, and disability benefit payments increased $300 million and $274
million during FY11 and FY10, respectively. During FY11, benefit payments
increased from $3,928 million with 97,754 recipients (in FY10) to $4,228
million with 101,288 recipients.
·
The
overall increase in benefit payments is due to an increase in retirement
benefits and number of retirees. Retirement benefits were higher as a result of
annual increases in retirement benefits and an increase in the number of
retirees from 87,654 as of June 30, 2010 to 90,967 as of June 30, 2011.
·
The
average monthly benefit was $3,871; the average age was 70; the average years
of service was 28; the average pension paid by the Teachers’ Retirement System
of Illinois: $46,452.
·
Refunds of contributions increased $17 million and $6 million in
FY11 and FY10, respectively. The increase during FY11 is the result of a
greater number of member, survivor benefit, and retirement refunds.
·
The
annual actuarial valuation measures the total liability for all benefits earned
to date. The accrued liability is a present value estimate of all the benefits
that have been earned to date but not yet paid. The actuarial accrued liability
increased $4.0 billion and $4.3 billion during FY11 and FY10, respectively, to
$81.3 billion on June 30, 2011 and $77.3 billion on June 30, 2010.
·
The
unfunded liability is the present value of future benefits payable that are not
covered by the actuarial value of assets as of the valuation date. The unfunded
liability increased $3.6 billion during FY11 to $43.5 billion on June 30, 2011
compared to an increase of $4.9 billion during FY10 to $39.9 billion on June
30, 2010. The funded ratio reflects the percentage of the accrued liability
covered by the actuarial value of assets. The funded ratio decreased to 46.5
percent on June 30, 2011 from 48.4 percent on June 30, 2010.
·
In
2011 and 2010, the unfunded liability and funded ratio are based on a smoothed
value of assets. Public Act 96-0043 required the five state retirement systems
to begin smoothing actuarial gains and losses on investments over a five-year
period, beginning with the valuation for the year ended June 30, 2009. When the funded ratio was based on the market
value of assets, the reported funded ratio was impacted immediately by changes
in market conditions. State funding requirements based on market value assets
were also immediately impacted and, therefore, more volatile. Using the
smoothed value of assets will result in more stable reported funded ratios and
state funding requirements over time.
TRS Investment Return Rates:
Over the last 30
years (ending FY2010): 9.3 percent; over the last 25 years (ending FY2010): 8.6
percent; over the last 10 years (ending FY2011): 6.9 percent; using “smoothing”
or averaging over the last five years: 5.5 percent.
Rate of Return
for Last 10 Years:
2002 (-3.2) percent
2003 4.9
2004 16.5
2005 10.8
2006 11.8
2007 19.2
2008 (-5.0)
2009 (-22.7)
2010 12.9
2011 23.6
It is my opinion
that before changing the expected rate of return for TRS, why not wait until
after FY2014 to obtain a more realistic assessment of the TRS’ investment
returns? Since actuaries use “smoothing” or the averaging procedure that
includes both gains and losses over a five-year period, to determine funding
data, why not wait a few more years before drawing further conclusions about
expected returns? In other words, allow
the State’s revenue to recover from the Great Recession of 2008-09. After all, the State of Illinois does not
face an urgent liquidity crisis (because pension fund liabilities are
long-term). Why not re-evaluate three
or four years from now to see whether the economy and Market have fully recovered?
Statistics are from TRS:
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.