TRSL adds $1.1 billion in assets, DROP interest announced
October 8, 2018UPDATE: At its November meeting, the TRSL Board of Trustees adopted revisions to the projected employer contribution rates for FY 2019-2020 due to changes in investment earnings assumptions. The revised contribution rates for all employers represent a decrease from current contribution rates. For K12 employers, the revised rate will be 26.0%, and for higher education employers the revised rate will be 25.3%. These revised rates are subject to approval by the Public Retirement Systems’ Actuarial Committee (PRSAC), which typically meets before March.
The latest actuarial valuation report for the Teachers’ Retirement System of Louisiana (TRSL) held positive news about the pension plan that provides retirement benefits and services for more than 195,000 members. According to the report, the System’s assets and funded status increased over last fiscal year, and projected employer contributions for the next school year will go down.
TRSL’s valuation assets increased by $1.1 billion over the previous fiscal year, bringing them to an all-time high of $20.3 billion. The System’s funded status, a metric commonly used to gauge a pension plan’s financial position, has been steadily climbing since the 2008 market downturn, and now stands at 65.8%—an increase of 1.3 percentage points over last fiscal year.
The report also showed the projected employer contribution rate (aggregate) will drop to 25.6% for Fiscal Year 2020 from its current rate of 26.5%. The unfunded accrued liability (UAL), which is debt owed by the state to TRSL, held steady at $10.5 billion.
“This year’s valuation recognized several assumption changes to the plan, including adjustments to mortality rates; but our investment performance and the state’s required annual payments to the debt kept the UAL flat,” said TRSL Director Dana L. Vicknair. “If not for those assumption changes, the UAL would have decreased by almost $700 million, resulting in a balance of less than $10 billion.”
The System’s actuarial rate of return for FY 2018 was 9.48%, exceeding its assumed rate of 7.70%. Over the longer term, TRSL’s 30-year average actuarial rate of return is 8.26%.
DROP interest: Fiscal Year 2018 interest for DROP accounts belonging to members who were eligible to participate in the program prior to January 1, 2004, is 8.98%. DROP accounts for members who were eligible to participate on or after January 1, 2004, earn interest at the liquid asset money market rate of return, which averaged 0.9538% in FY 2018.
The actuarial valuation report, which includes the recommended 8.98% DROP interest rate, must now be approved by the Public Retirement Systems’ Actuarial Committee (PRSAC).
NOTE: Data in the actuarial valuation report is calculated by recognizing the System’s investment gains and losses over a five-year period to project funding requirements. Therefore, actuarial data, which includes investment returns and asset value, is not the same as market data which can vary on a daily basis.