Texas Teacher Pension Needs 21% Return to Keep 80% Funded Ratio

[Poboy]

Texas Teacher Pension Needs 21% Return to Keep 80% Funded Ratio
By David Mildenberg - Apr 19, 2011 11:46 AM CT

e Teacher Retirement System of Texas needs an annual return of 21 percent in the year ending Aug. 31 to maintain an 80 percent funded ratio, the level actuaries consider adequate to cover liabilities, said its deputy director.

“We’d have to have remarkable investment returns for the rest of the year to reach 80 percent,” Brian Guthrie, the fund’s executive director-designate, said at a Texas House hearing today in Austin.

The fund’s investment return was 14.7 percent in 2010, the best among large public pension funds, Chief Investment Officer Britt Harris said at an April 7 board meeting. The fund had about $109 billion on April 1, up from $95.7 billion in September.

Even with the gains, the pension’s funded ratio -- the portion of promised benefits covered by current assets -- dropped to 81.3 percent as of Feb. 28 from 82.9 percent on Aug. 31, 2010, because of trading losses in 2008 and 2009 included through a process called smoothing, Executive Director Ronnie Jung said April 7.

Public pensions nationwide are grappling with about $3.6 trillion in unfunded liabilities, according to a 2010 study by Joshua Rauh of Northwestern University and Robert Novy-Marx of the University of Rochester.

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http://www.bloomberg.com/news/2011-04-19/texas-teacher-pension-needs-21-return-to-keep-80-funded-ratio.html

[Poboy]

1. No replies, but I think it is safe to say the fund will not meet their goals.

[senseandsensibility]

2. kick for the afternoon crowd

We can bail out billionaires who cause our economic troubles in the first place. Just saying.

[FreeJoe]

3. Public vs Private

We put really sensible rules in place for private retirement funds so that they have a really good chance of paying out their promised benefits. Sadly, we don't apply those same rules to public funds, so they are typically very underfunded. We use that as a trick to give public employees higher benefits today while hiding those costs. We should have one standard set of rules for pension funding that require all employer (public or private) to fully fund their retirement promises so that future generations aren't stuck holding the bag.