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Investments lose value for state retirees

by Michael R. Wickline | August 30, 2022 at 12:00 a.m.
The state Capitol is shown in this file photo. (File)

The Arkansas Highway Employees Retirement System's investments dropped in value in the fiscal year that ended June 30 by $246 million to $1.46 billion amid turbulence in the stock and bond markets, the system's executive secretary, Robyn Smith, said.

The system's investment return in fiscal 2022 was minus 9.16%, Smith said.

That ranked slightly ahead of the median of minus 9.35% for public pension systems of similar size, according to the San Francisco-based investment consultant Callan Inc.'s performance evaluation program.

Meanwhile, the Arkansas Judicial Retirement System's investments dipped in value by $50.3 million in fiscal 2022 to $296.9 million, the system's investment consultant, Callan, reported.

The judicial retirement system's investment return was minus 12.32%, lagging the median of minus 10.10% for pension systems similar in size, Callan reported.

The highway employee and judicial retirement systems are two of the smaller state government retirement systems.

State government's second-largest retirement system is the Arkansas Public Employees Retirement System.

The Public Employees Retirement System's investment return in fiscal 2022 was minus 10.54%, dropping in value by $1.5 billion in the last fiscal year that ended June 30 to $10.04 billion amid declining stock and bond markets, Callan reported in mid-August.

The system's investment return ranked in the bottom 32% among similar public retirement systems across the nation, Callan reported to the Arkansas system's board of trustees.

Fiscal year 2022 figures for state government's largest retirement system, the Arkansas Teacher Retirement System, won't be available until later next month, according to system Executive Director Clint Rhoden.

In mid-August, Rhoden said that his preliminary estimate of the system's investment return for fiscal year 2022 was roughly minus 4.5%.

Rhoden has estimated that the system's investments were recently valued at roughly $20.3 billion and the system's investments were valued at $21.1 billion on June 30, 2021. The system's investment value in fiscal 2022 was bolstered by net proceeds from a lawsuit settlement earlier this year.

The General Assembly, through Act 454 of 1949, established the Arkansas State Highway Employees' Retirement System.

Over the course of fiscal 2022, the Highway Employees Retirement System made changes in its portfolio to reflect the turbulence in the overall market, Smith said. This led to a reduction of stock investments of $1.11 billion on June 30, 2021, to $743 million on June 30, 2022, she said.

In addition, the system's government bond holdings increased from $244.3 million to $319.2 million, and cash holdings increased from $244 million to $297 million, while corporate bonds inched down from $105.9 million to $105.6 million, according to Smith.

The system earned an investment return of 29.86% in fiscal 2021, which ended June 30, 2021, as its investments increased in value $1.71 billion.

The system has averaged an investment return of 8.63 % a year over the past five years to rank in the top 5 percentile of pension systems of similar size across the nation. Its average return of 8.39% over the past 10 years ranks it in the top 23 percentile of pension systems of similar size across the nation, Callan reported.

The system's target rate of return is 7.5% a year, Smith said.

As of June 30, 2021, the system's unfunded liabilities totaled $198.4 million with a projected payoff period of 12-and-a-half years, she said.

The Highway Employees Retirement System has more than 6,000 working and retired members.

The system paid out $125.6 million in retirement benefits in fiscal 2022, Smith said.

The employer paid $27.9 million into the system in fiscal 2022, while employees contributed $11.9 million into the system, she said. The state pays 14.9% of salary into the system, while working members pay 7% of their salary into the system.

As of June 30, 2021, the system had 3,367 working members with an average salary of $46,532 a year and 306 other working members in the deferred retirement with an average salary of $31,917 a year, she said.

As of June 30, 2021, the highway retirement system also had 2,603 service retirees with an average benefit of $34,874 a year, 415 disabled retirees with an average benefit of $16,971 a year and 517 beneficiaries with an average benefit of $15,908 a year, she said.

JUDICIAL RETIREMENT

The Arkansas Judicial Retirement System -- created by the General Assembly through Act 365 of 1953 -- is for the state's Supreme Court, Court of Appeals and circuit judges.

In fiscal 2022, the value of the Judicial Retirement System's domestic stock investments declined from $131 million on June 30, 2021 to $108.9 million, while the value of its international stock market investments dropped from $49.9 million to $32.1 million, according to Callan.

The system's domestic bond investments slipped in value from $139.8 million on June 30, 2021, to $122.5 million on June 30, 2022, while real estate investments increased in value from $26.2 million to $33.2 million, Callan reported.

This comes on the heels of the system's seeing an investment return of 25.99% in fiscal 2021, ending that fiscal year valued at $347.2 million.

The system has averaged an investment return of 6.28% a year over the past five years to rank in the top 45% of pension systems of similar size and 7.05% a year over the past 20 years to rank in the top 39% of pension systems of similar size, Callan reported.

The system's target rate of return is 5.75% a year.

As of June 30, 2021, the system's unfunded liabilities totaled $5.9 million, according to the system.

The system has more than 300 working and retired members.

In fiscal year 2022, the system paid out $17.06 million in retirement benefits, while the employers contributed $8.6 million to the system and working members contributed $1.3 million to the system, according to the system.

The system includes 145 working members with an average annual pay of $181,097 and 176 retired members with average annual benefits of $97,386 a year.

Print Headline: Investments lose value for state retirees

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