AUSTIN, Texas, Dec. 9, 2020 /PRNewswire/ — Texas state and local pension funds combined in 2019-20 to nearly maintain the record-breaking achievements of 2018-19, according to a trend analysis of aggregate amortization periods performed by the Texas Association of Public Employee Retirement Systems. The systems’ achievement was notable in holding mostly steady despite extreme market fluctuations early in 2020 due to the COVID-19 pandemic.
Forty-five pension systems for police, firefighters, and municipal employees managed to remain in the Texas Pension Review Board’s “recommended” amortization period of 0-25 years, comparing well to the 47 systems in that category last year at this time. The PRB is the state agency mandated to oversee all Texas public retirement systems, both state and local, regarding their actuarial soundness.
Four systems moved into the infinite amortization category, signaling a troubled fund, to bring the total there to 12, the largest amount since 2014. Four systems also seemed to move from the 0-15-year amortization period category to the 15-25-year category, a slight deterioration. Twenty-nine systems remained in the 25-40-year category, the same number as in 2019.
Amortization periods are somewhat comparable to home mortgages, depicting the number of years needed to pay all present and future projected benefits to employees. The PRB has said that amortization periods are the single “most appropriate” measure of public retirement systems’ health, even though other metrics and benchmarks can also provide significant clues to current and future financial well-being.
“The steady performance should be viewed in a positive light given the significant impacts which lower investment targets create,” said Art Alfaro, executive director of TEXPERS. “Texas pensions systems have courageously lowered target rates to an average of about 7.25 percent, and this would normally cause significant deterioration of amortization periods if there were not other underlying, offsetting dynamics.”
TEXPERS full report is available at http://www.texpers.org/special_report_2020_am_period and charts at http://www.texpers.org/2020_am_period_charts.
The Texas Association of Public Employee Retirement Systems (TEXPERS) is a statewide voluntary nonprofit association which provides quality education to trustees, administrators, professional service providers and employee groups and associations engaged or interested in the management of public employee retirement systems.