The Arkansas Local Police and Fire Retirement System's investments increased in value by about $402 million to $2.44 billion in 2019, the system's investment consultant reported Thursday.
Larry Middleton, executive vice president for Stephens Inc., told the system's trustees that "2019 was anybody's standard" for "a banner year," and the system's investment return was 19%.
But as of the close of business on Wednesday night, the system's investments had dropped in value to $2.33 billion amid declining stock markets, Middleton said after a meeting of the trustees.
The coronavirus disease has become a global issue, and "some of this is driven by emotion," he said.
The system's investments dropped by about 5.5% in value as of Wednesday night and that decline could likely be closer to 7% in light of Thursday's stock market drop and other changes, Middleton said Thursday morning.
"So we got a lot of work to do, but we've got nine months left to do it [this year]," he said.
"We had a strong economy going into this. If we can get past this one issue and get our economy flowing again and confidence, I really think there is an opportunity to do better," Middleton said.
The trustees decided to stick with a projected annual investment return of 7.5%.
The system's actuary, Gabriel, Roeder, Smith & Co., had suggested reducing the targeted annual investment return to between 6.25% and 7%.
Gabriel, Roeder, Smith hasn't completed its actuarial report for calendar year 2019.
In 2018, employers paid $113.2 million into the system with a statewide average contribution rate of 22.44% of payroll, but about 40% of that amount was from the state's insurance premium tax, according to system Executive Director David Clark.
Working members paid $24.4 million into the system in 2018, he said. The contribution rate is 8.5% of salary for members not covered by Social Security through their employer and 2.5% of salary for members who are covered by Social Security, he said.
The police and fire retirement system included 6,755 paid service members with an average annual salary of $51,908 and 7,461 volunteer service members with no reported earnings as of Dec. 31, 2018, according to Clark.
The system also included 6,068 retired members and survivors with an average annual benefit of $12,972 a year as of Dec. 31, 2018, he said. The annual benefit is $23,724 for paid service employment and $1,152 a year for volunteer service employment.
The system's liabilities were 76% funded with a projected payoff period of 16.8 years for paid service and 16 years for volunteer service as of Dec. 31, 2018, he said. The system's unfunded liabilities totaled about $600 million as of Dec. 31, 2018. Actuaries often compare the projected payoff period for unfunded liabilities to a mortgage on a home.
Metro on 03/13/2020