As of July 1, 2020, the PERA General Employees Retirement Plan (the “Plan”) had a funding ratio of 79.1%. Collectively, the statewide funds in Minnesota including those administered by PERA, MSRS, and TRA have a funding ratio of 80.6%. The national average for pension plans is about 73.8%. Rankings of state pension funding ratios in 2018 showed Minnesota as the 15th best funded state. Only about a half dozen states are currently above 90% funding.
The funding ratio is a measure of the market value of plan assets divided by the actuarial accrued liability. Actuarial accrued liability is the standard used by pension plans to measure the present value of benefits that are attributable to a member’s past service. A plan is considered “fully funded” when the funding ratio is 100%. Anything less than 100% indicates that previously accrued member benefits have not yet been appropriately funded.
The Plan had a small setback from the 80.2% funding ratio of the previous year. The setback was primarily due to the actual investment return of 4.2% being less than the assumed return of 7.5%. Despite that setback, the Plan is still on a path to reach full funding in a reasonable period of time. Projections provided in late 2019 from PERA’s actuary indicate that the Plan is expected to reach full funding in 2037 if all assumptions are met. That translates to an expected funding ratio improvement of about 1% per year. New projections in January will refine that result, but a significant change is unlikely. We still anticipate full funding to be reached within 20 years.
Simply put, the Plan is relatively well funded and on a path to be fully funded within a reasonable period of time. In fact, considering the positive returns so far in fiscal year 2021, the Plan is reaching its highest funding levels since the very early 2000’s. Despite all of the turmoil over the past year, the Plan has proven to be resilient on its path towards improved sustainability. Together with the other statewide plans, we expect to climb in the rankings of states with the best funded pensions.
PERA proposed December 2020 Education Minnesota Retired Newsletter Article
As of July 1, 2020, the PERA General Employees Retirement Plan (the “Plan”) had a funding ratio of 79.1%. Collectively, the statewide funds in Minnesota including those administered by PERA, MSRS, and TRA have a funding ratio of 80.6%. The national average for pension plans is about 73.8%. Rankings of state pension funding ratios in 2018 showed Minnesota as the 15th best funded state. Only about a half dozen states are currently above 90% funding.
The funding ratio is a measure of the market value of plan assets divided by the actuarial accrued liability. Actuarial accrued liability is the standard used by pension plans to measure the present value of benefits that are attributable to a member’s past service. A plan is considered “fully funded” when the funding ratio is 100%. Anything less than 100% indicates that previously accrued member benefits have not yet been appropriately funded.
The Plan had a small setback from the 80.2% funding ratio of the previous year. The setback was primarily due to the actual investment return of 4.2% being less than the assumed return of 7.5%. Despite that setback, the Plan is still on a path to reach full funding in a reasonable period of time. Projections provided in late 2019 from PERA’s actuary indicate that the Plan is expected to reach full funding in 2037 if all assumptions are met. That translates to an expected funding ratio improvement of about 1% per year. New projections in January will refine that result, but a significant change is unlikely. We still anticipate full funding to be reached within 20 years.
Simply put, the Plan is relatively well funded and on a path to be fully funded within a reasonable period of time. In fact, considering the positive returns so far in fiscal year 2021, the Plan is reaching its highest funding levels since the very early 2000’s. Despite all of the turmoil over the past year, the Plan has proven to be resilient on its path towards improved sustainability. Together with the other statewide plans, we expect to climb in the rankings of states with the best funded pensions.