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MOSERS investments show positive growth

by Joe Gamm | January 6, 2022 at 5:00 p.m.

The Missouri State Employees Retirement System -- MOSERS -- received a 26.4 percent market return on investments for the year ending June 30.

The return wasn't enough to pull MOSERS off the Joint Committee on Public Employee Retirement's annual Watch List (produced in December each year). But it is a sign of growth.

Michael Ruff, executive director of the committee, told committee members at a hearing Thursday gains and losses are not recognized immediately, so the investment returns will show over the next five years.

"That is a very positive development," Ruff said.

Lawmakers created the joint committee in 1983 to monitor the work and financial stability of various pension funds that provide retirement benefits to state and local government employees. The list helps lawmakers stay abreast of plans that have struggled to meet obligations.

The list includes public employees' retirement plans that have funded ratios of less than 70 percent on a market value basis (they cover 70 percent or less of liabilities). Liabilities are benefits for public employees the plans expect to have to pay out in the future.

Nine plans made the list this year. Others on this year's list include the Judicial Retirement Plan, MoDOT & Patrol Employees' Retirement System (MPERS), and six more-localized plans.

MOSERS has been a fixture on the list since it first arrived on the list in 2016, in part, because every five years, the organization conducts an experience study and adjusts "investment assumptions," based on the studies. Assumptions essentially are guesses about how much investments will grow, based on the previous five years.

In 2016, the MOSERS plan was at 8 percent. The MOSERS Board moved it down to 7.65 percent, based on the study "and a lot of analysis," said Ronda Stegmann, MOSERS executive director.

"We know that when the investment return assumption is lowered, your contribution requirement will go up," Stegmann said. "That was a big move in 2016 that put us under 70 percent. The board has continued to move that investment assumption down."

The assumption has reached 6.95 percent.

The downward push has been ongoing since 2011, after the General Assembly passed new tiers for employees covered by MOSERS, the Judicial plan and the MoDOT/Highway Patrol plan. The new tier calls for 4 percent contributions by employees. It covers all employees who began working for the state Jan. 1, 2011, or later.

Employees who worked for the state before Jan. 1, 2011, don't provide any contributions.

"We have about 54 percent of active employees who are in that new tier -- making an employee contribution," Stegmann said. "Over time, 100 percent of the employees will be in the new tier contributing (4) percent of pay."

One of the takeaways that comes from all of the changes the MOSERS board approved (such as adoption of generational mortality) after doing an experience study in 2021 was employer contribution rate will increase as a percentage of payroll, Ruff told the committee. For the fiscal year ending 2022, it had been 23.5 percent and will go up to 26.33 percent.

Active membership in the plan has declined.

There has been a decline of 6.9 percent in recent years. As of June 30, 2020, MOSERS had about 46,000 members, Ruff said. And as of June 30, 2021, the organization had 42,829.

"That changes the demographics of the plan," Ruff said. "We also see that the payroll has remained relatively flat. Contributions as a percentage of payroll goes up."

He noted the plan had 55,914 active members in 2004. That affects the contribution rate, he added.

The Judicial Retirement Plan underwent a few changes this year. Its board adopted new mortality tables geared toward public employees, Ruff said. It adopted 75 percent generational mortality, meaning it takes into account that people are living longer, and will need access to their pensions longer. That usually increases liabilities, Ruff said.

Of 418 members on the plan, 252 are on the new tier.

"As more judges begin serving under the 2011 tier, the normal cost will decrease," Ruff said. "That was by design."

MPERS has been on the watch list for a long time as well, Ruff said.

The MPERS board analyzed the retirement plan about 10 or 12 years ago, Ruff said. It set up a temporarily accelerated amortization plan -- when a borrower makes extra payments toward debt -- for the payment of unfunded retiree liabilities.

"That has helped get the plan in a better position," Ruff said.

Print Headline: MOSERS investments show positive growth

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