LITTLE ROCK -- The Arkansas Teacher Retirement System's investments increased from $386 million to $14.97 billion in the fiscal year that ended June 30, system executive director George Hopkins said Monday.
More recent figures, reflecting a sharp downturn in the stock market, aren't yet available, Hopkins added.
The system's investment return was 5.2 percent in fiscal 2015, ranking among the top 2 percent of the nation's public pension systems, Hopkins said in a memo to the system's board of trustees.
After the system paid retirement benefits to system retirees and covered operating expenses, the system's investments were $386 million higher.
"Despite a difficult investment environment, ATRS had great relative returns in 2015," Hopkins said.
The system's investment return has averaged 11.7 percent during the past five years, ranking among the top 8 percent of public pension systems, and 7.6 percent during the past 10 years, ranking among the top 1 percent of public pension systems, Chicago-based Aon Hewitt Investment Consulting said in a preliminary report to the system.
Hopkins, who has been the system's executive director since December 2008, said the system has performed relatively well because the system "has focused on diversification and pacing into alternative investments [such as private equity] that are less correlated to stock market cycles."
The teacher retirement system is state government's largest retirement system, with more than 100,000 working and retired members.
The second largest, the Arkansas Public Employees Retirement System, has more than 75,000 working and retired members.
The public employees system's investments increased in value by $20 million to $7.82 billion in the fiscal year that ended June 30 as it posted a 2.45 percent investment return, the system's investment consultant reported last week.
During fiscal 2015, the Arkansas Teacher Retirement System's domestic stock market investments posted a 6.7 percent investment return to boost their value to $3.9 billion, while its global stock market investments recorded a 1.8 percent investment return to reach $5 billion, Aon Hewitt Investment Consulting said in its preliminary report to the system.
The teacher retirement system's bond investments recorded a 1 percent investment return in fiscal 2015 to reach $2.3 billion, while private equity investments posted an 11.9 percent investment return to reach $1.4 billion, the consulting firm said.
The system's real estate investments recorded a 13.4 percent investment return to $1.2 billion, timber investments had a 9.4 percent investment return to reach $382 million, and agriculture investments posted a 2.5 percent investment return to reach $84 million, the investment consulting firm said.
School districts and other system employers paid $409.9 million into the system, while their employees contributed $126.9 million into the system in fiscal 2015, Hopkins said. System employers pay the equivalent of 14 percent of their employees' salaries into the system, while many of their employees pay 6 percent of their pay into the system.
The system's actuaries at Gabriel, Roeder, Smith & Co. of Southfield, Mich., won't complete a full report on fiscal 2015 until November or December, Hopkins said.
In fiscal 2014, the system included 70,225 working members with an average age of 44.7 years, an average service of 10.2 years and an average salary of $35,673, Gabriel reported last year. The system also included 38,478 retired members with retirement benefits totaling $822 million (an average annual pension of $21,362), the actuarial firm reported. It also reported 4,127 working members in deferred retirement plans with an annual combined payroll of $253 million.
In fiscal 2014, the system's unfunded liabilities fell from $4.4 billion with a 70-year pay-off period to $3.9 billion on June 30, 2014, with a 39-year pay-off period, according to Gabriel.
Actuaries often compare unfunded liabilities to mortgages. Unfunded liabilities are the amount by which the system's liabilities exceed an actuarial value of investments.
Hopkins said he expects that the pay-off period for the system's unfunded liabilities will drop below 30 years in the actuarial firm's report for fiscal 2015, while the system will continue to carry about $1 billion in unrecognized investment gains on its books. The system's actuary recognizes investment gains and losses for actuarial purposes by phasing them in over a four-year period.
Under state law, state government retirement systems aim to have pay-off periods for their unfunded liabilities at 30 years or below.
"Based upon that status, the law does not allow ATRS to seek an increase on employer contributions," Hopkins said. "Avoiding a contribution increase is also consistent with the ATRS approach for many years to avoid placing a heavier burden on the budgets of schools."
Hopkins said his recommendation to the system's board of trustees "will be that ATRS should maintain the current contribution rate and should maintain the current benefit structure without any changes.
"I do not expect the board to seek a contribution increase or make changes to benefits since ATRS is expected to be below a 30-year [pay-off period for unfunded liabilities] with a large unrealized gain [of about $1 billion]," he said.
NW News on 08/25/2015