Georgia has moved the needle on its state retirement systems' liabilities and may see full funding in the next 10 to 20 years, officials said.
The state’s two retirement plans have an average funded ratio of 76 percent, which is above the national average of 69 percent, according to the nonprofit Pew Charitable Trusts. It is a rising trend to better fiscal health for the state.
The Teachers Retirement System of Georgia (TRS) has 77.4 percent of the funding it needs to finance the retirement of its members, L.C. “Buster” Evans, executive director of the system, told a House Appropriations subcommittee Wednesday. The Employees’ Retirement System of Georgia (ERS) has 75.1 percent of its required overall funding, Jim Potvin, the executive director, told lawmakers.
“That is up from a low of 71.4 percent, a few years ago," Potvin said. "We are on a track right now to realize a 100 percent funding ratio in the early 2030s time period.”
All 50 states’ pension systems saw a decline in funding after the recession in 2008. The national pension debt is more than $1 trillion, according to Pew. Georgia’s pension systems have seen slow recovery, according to officials. Rehabilitation of the systems has been catalyzed by policy changes.
ERS, which manages pension benefits for public school employees, the judicial and legislative systems, the military and other state employees, has made adjustments to reduce its debt to asset ratio.
ERS officials cut the total length of time it expects to pay off its liabilities from 30 years to 25 years. A shorter period reduces the state’s financial burden and requires more contributions from members. Officials slowly have dropped the assumed investment rate of return from 7.5 percent a year to 7.3 a year. Potvin said the next goal is to bring down the rate to 7 percent as a longterm solution.
The ERS has assets of $16.7 billion, according to its latest financial reports.
There are a total of 110,000 active members across all the plans. The system pays out more than $1.5 billion a year overall to retirees. The average pension benefit is about $2,220 a month.
TRS has around 400,000 members and pays $4.7 billion to its retirees. Its assets have grown by $19 billion over the past three-and-a-half years, with assets at $84.6 billion, according to Evans.
Retirees receive $2,500 or $3,500 a month, depending on when they were hired. TRS has maxed out its employee contribution rate at 6 percent, dropped the state’s contribution by 2 percent and reduced its assumed investment rate by 0.25 percent to 7.25 percent.
Pending state legislation could mean even more of an increase in assets for TRS.
Senate Bill 294 would allow TRS to invest up to 5 percent of its assets into alternative investments, which could yield greater returns. House Bill 109 puts a cap on how much sick time retirees can use as credit.