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Friday, November 13, 2009

Retirement Challenge

By Dan Liljenquist
Utah State Senator, District 23

Here is the 28 page PDF from the Actuaries for the URS system presented to the Retirement & Independent Entities interim committee.

Based on this data, if we keep the retirement system exactly the same

the State will be required to ramp Defined Benefit contribution rates from 13.25% to 23.10% over the next 5 years and the rates will stay at 23.10% for the next 25 years to pay for the current $6.5 Billion unfunded liability that opened up due to the market crash of 2008. To put this in dollars, the State will have to pay $400 Million (plus 4% growth) per year for the next 25 years to pay for the current promised benefits.

We need to get serious about other options.

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2 Comments:

The Senate Site said...: More discussion on Dan Liljenquist's Facebook page.

RC; 11/13/2009 4:30 PM
Anonymous said...: Musings:

Since March, the Dow Jones industrial average has jumped 57 percent and the Standard & Poor's 500 index has gained 62 percent.

The Dow is trading above 10,000 for the first time since October 2008, though it is still 27 percent below its peak two years ago.

In 2008 investment returns for Utah were better than 80% of the other large pension plans
in the nation. (ULCT)

The Utah State Retirement System recently lost around $5 billion of portfolio value. That means the fund went from nearly fully funded to $6.5 billion unfunded in a very short time period.

On February 23, the Dow was 7,114.78. Perhaps this was the date used to calculate the unfunded liability. If so, it would surely create the urgency needed to make a hurried change.

The last two centuries could easily have been less hospitable to the United States, most likely lowering the stock market's returns. An investor couldn't have known in advance that the United States would win two world wars, for example, or emerge victorious from the cold war. In any case, there is no guarantee that the next two centuries will be as kind to the domestic equity market as the last two.

So who can really say if 23.10% over 5 years and $400 million per year really has anything to do with what will really happen.; 11/19/2009 8:48 AM