The Arkansas Teacher Retirement System's investments dropped in value by $572 million last fiscal year to $14.4 billion during stock market turbulence, according to the system's investment consultant.
The system's investment losses totaled $53 million in the 2016 fiscal year that ended June 30, according to a written report from Chicago-based Aon Hewitt Investment Consulting.
The value of system investments fell largely because the system paid out more than $1 billion in benefits while receiving $537 million in contributions from employers and members, system Executive Director George Hopkins said Tuesday.
The teacher retirement system "ended the 2016 fiscal year essentially in the middle of the pack of returns for large public pension plans in the U.S," Hopkins said.
The return on investments was minus 0.5 percent in the fiscal year, compared to a median return of minus 0.2 percent for public retirement systems, Aon Hewitt reported.
Over the past five years, the average investment return for the system was 7.1 percent a year compared with a median of 6 percent for public retirement systems, ranking Arkansas' teacher retirement program in the top 9 percent of systems nationally, Aon Hewitt reported.
Over the past 10 years, the system averaged a 6.3 percent return per year compared with a median of 5.3 percent nationally, ranking the state's system in the top 3 percent, the consultant said.
The system is state government's largest retirement system with more than 100,000 working and retired members.
The system's investments were "worth slightly more than $15 billion," as of Tuesday, Hopkins estimated.
At the end of the fiscal year on June 30, the system's stock market investments were valued at $8.06 billion after experiencing an investment return of minus 4.8 percent, Aon Hewitt reported.
The system's bond investments were valued at $2.44 billion on June 30, after earning an investment return of 3.5 percent, Aon Hewitt said.
The system's private equity investments totaled $1.51 billion after earning an investment return of 7.5 percent last fiscal year, while the system's real estate investments totaled $1.28 billion on June 30 after earning an investment return of 12 percent, according to Aon Hewitt.
The system's "opportunistic/alternative" investments were valued at $486.6 million after experiencing an investment return of minus 1.7 percent last fiscal year, while the system's timber investments totaled $274.6 million after earning an investment return of 0.4 percent. The system's agricultural investments were valued at $140 million after earning an investment return of 9.8 percent, the investment consultant reported.
The system's investments also included $122.9 million in cash and $70.3 million in infrastructure on June 30, Aon Hewitt reported.
School districts and other system employers paid $408.6 million into the system last fiscal year, while their employees contributed $128.6 million, according to Hopkins.
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 actuary at Gabriel, Roeder, Smith & Co. won't deliver its actuarial report on fiscal 2016 to the system's trustees until December, Hopkins said.
In fiscal 2015, the system included 68,945 working members with an average age of 44.6 years, average service of 10.3 years and an average salary of $36,717, the actuaries reported last year.
The system also included 3,974 other working members in the deferred retirement plan with a total payroll of $246 million (an average of about $61,902) in fiscal 2015.
The system had 40,748 retired members who were paid retirement benefits totaling $917 million (an average benefit of about $22,504) in fiscal 2015, the actuarial firm said.
Actuaries often compare unfunded liabilities to mortgages. Unfunded liabilities are the amount by which the system's liabilities exceed an actuarial value of investments.
On June 30, 2015, the system's unfunded liabilities totaled $3.7 billion with a projected payoff period of 33 years, according to Gabriel.
The actuaries recognize the system's investment gains and losses by phasing them in over a four-year period to determine an actuarial value of the system's investments.
Hopkins said the system expects some level of increased liabilities due to its investment performance in fiscal 2016, and "at the same time excess gains from past years act to offset the impact of this year's loss."
"In talks with the actuaries, [the system] anticipates the amortization period to be right at 30 years as of June 30, 2016," he said.
Under state law, state government retirement systems aim to have projected payoff periods for their unfunded liabilities at or below 30 years.
Metro on 09/07/2016