On March 6th The members of the Teacher’s Pension Annuity Fund (TPAF) received the actuarial report for the fiscal year that ended June 30, 2013. The market value funded ratio of the TPAF increased slightly from 50.86% to 51.29% when compared to June 30, 2012. The actuarial value funded ratio lost 2.52% from 60.71% to 58.19%. The actuarial report shows that the fund lost ground due to lower-than-expected investment returns and the state payment of only 2/7 of the Total Pension Contribution By Statute.
Chapter 1, P.L. 2010 established a seven year phase in of the Total Pension Contribution by the state. Each year the state is required to increase the payment by one seventh to the pension system that funds all of the public pension funds. The state paid approximately $500 million in FY 12, $613 million in FY 13, just under $924 million in FY14 and is to make a $1.32 billion payment as part of the Governor’s proposed budget – the 4th year of the 7 year plan.
At the same time, TPAF members have seen their pension contributions increase from 5.5% to 6.5% on October 1, 2011 and then the rate did/will increase by 1/7 of 1% on each July 1st until the contribution rate reaches 7.5% (July 1, 2018)
The State’s Total Pension Contribution by Statute for the TPAF is determined as the sum of:
- The Normal Contribution (based on the 1/60th formula),
- The additional formula Normal Cost (Amount over 1/60th for the 1/55 formula)
- And the Accrued Liability Contribution.
For Fiscal Year 2015 the TPAF portion is approximately $2.3 billion. Based on Chapter 1, P.L2010, the State required appropriation for FY 2015 is 4/7 of that amount (57.1%) – just under a billion dollars.
The Pension fund investments saw a rate of of return of approximately 11.69% on a market value basis and 4.86% on an actuarial value basis.
The report indicates an increase in active membership for the first time in four years (up 1.6%), as well as an increase in the average pay of active members (up 1.19%.)
As part of Chapter 78 P.L.2011 COLAs was eliminated until the Target Fund Ratio is reached. At that time a new pension committee will be formed to review possible changes to member contributions, retirement benefits including eligibility conditions, and any reactivation of COLA. The committee will be required to ensure that any decision they make must ensure the Target Fund Ratio is maintained during the 30 years following implementation. The current Target Fund Ratio is 77.14%.