Tags: NYC | assumed | Return | Rate | Pensions

NYC May Cut Assumed Return Rate on Pensions, Liu Says

Friday, 19 Nov 2010 12:52 PM

New York City may reduce the assumed return on its $100.5 billion of pension investments from the current 8 percent rate, Comptroller John Liu said.

The move would increase the amount of money the city must contribute to its five public retirement plans even as it faces a $2.4 billion budget deficit next year, Liu said after a speech at the Union League Club in Manhattan. The city’s pension costs are expected to rise more than 15 percent next year, to $8.3 billion, budget director Mark Page said. That’s about 20 percent of municipal tax revenue, he said.

“The city has maintained an 8 percent assumed rate for a long time,” Liu said. “It’s fair to say that the assumption will be lowered at some point.”

Public-pension funds from New York state to Illinois are cutting their expected returns amid market losses and in the face of a sluggish economy. New York state’s $132.8 billion retirement fund lowered its target to 7.5 percent from 8 percent, while the Illinois State Employees’ Retirement System cut its rate to 7.75 percent from 8.5 percent, Tim Blair, the system’s executive secretary, said in a telephone interview.

In the 10 years from July 1999 to June 2009, New York’s pensions returned 2.09 percent, according to the city’s comprehensive annual financial report for the fiscal year ended June 30, 2009.

Trustees’ Approval

Liu didn’t say when the change might occur or what the new assumed rate might be. The decrease must be approved by the trustees of the five funds for civil employees, police officers, firefighters, teachers and school administrators as well as the state Legislature. The plans cover 334,000 city employees and 237,000 retirees and beneficiaries.

Liu’s prediction of a more conservative investment outlook follows remarks by Mayor Michael Bloomberg last month calling the pensions’ assumed rate of return unrealistically high.

New York City is seeking more power to set pension benefits for workers as retirement costs grow.

The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

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New York City may reduce the assumed return on its $100.5 billion of pension investments from the current 8 percent rate, Comptroller John Liu said. The move would increase the amount of money the city must contribute to its five public retirement plans even as it faces a...
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Friday, 19 Nov 2010 12:52 PM
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