Tags: New-York | Pension | Investment | Contributions

New York Cuts Pension Investment Outlook, Raises Contributions

Thursday, 02 Sep 2010 03:13 PM

New York’s $124.8 billion pension fund, the nation’s third-largest, reduced the assumed rate of return on its investments to 7.5 percent from 8 percent as it recovers from market losses, Comptroller Thomas DiNapoli said.

DiNapoli, the sole trustee of the pension fund, said state and local government employers’ payments to the fund will increase to about 16.3 percent of payroll in February 2012, from 11.9 percent due in February 2011. The fund covers 1 million current and retired government workers.

“The markets have become much more challenging over the past decade, which justifies a sensible reduction in the assumed investment rate of return,” DiNapoli said in prepared remarks for a press conference today in Albany, the state capital.

The assumed rate of return on investments is used to calculate the size of pension contributions from employers needed to pay retirees. The recommendation to lower the rate came from the pension fund’s actuary, Michael Dutcher.

Robert Whalen, a spokesman for DiNapoli, told Bloomberg News on Aug. 20 that a reduction to 7.5 percent or 7.75 percent was likely.

The new assumed return “is more fiscally conservative” than the national average for public pension funds and more conservative than the 8.1 percent average for the top 100 private U.S. pension funds, DiNapoli said, citing a study from actuarial firm Milliman Inc.

DiNapoli, a Democrat, said it will take time for the pension fund to recover from its 26 percent decline in the year ended March 2009 and that the pension plan may report assets equal to 94 percent of liabilities by March 2011. The funded ratio, based on a five-year average for asset values and actuarial projections of liabilities, was 107 percent last year, DiNapoli said. It will remain above the 80 percent level that marks a danger point for pension plans, he said.

The fund’s value for the quarter ending June 30 declined to $124.8 billion after investments posted a negative return of 4.38 percent, DiNapoli said. The fund was valued at $132.6 billion as of March 31.

Harry Wilson, a Republican and former investment manager who is running against DiNapoli in November’s election, said the changes announced today are too little, too late.

“Honest accounting of pension assets and liabilities would reveal a substantial underfunding” of $30 billion to $80 billion in New York’s plan, he said in a paper published today.

The New York pension plan’s investments haven’t performed as well as its peers, and by overestimating future performance, it is easier for DiNapoli and other New York politicians to conceal the plan’s true cost to taxpayers, Wilson said in a telephone call with reporters.

Assumed returns of 4 percent to 6 percent are more realistic, Wilson said. He recommended an adjustment to less- risky investments and a study of ways pension liabilities can be adjusted to slow the growth of contributions by the state and local governments.

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New York s $124.8 billion pension fund, the nation s third-largest, reduced the assumed rate of return on its investments to 7.5 percent from 8 percent as it recovers from market losses, Comptroller Thomas DiNapoli said. DiNapoli, the sole trustee of the pension fund, said...
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2010-13-02
Thursday, 02 Sep 2010 03:13 PM
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