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Pensions

Illinois Teachers to Receive $6.2B From State to Boost Funded Status

This marks the third year of cash infusions to bolster the pension plan, with a funding ratio stuck below 50%.
By Matt Toledo



Illinois will contribute $6.2 billion to the Teachers’ Retirement System of the State of Illinois, the fund at its December board meeting. The contribution will be granted in fiscal 2025, which begins in July 2024, and will be a 2.7% increase over the state’s $6.04 billion contribution this fiscal year. 

“A steadfast commitment by Gov. JB Pritzker and the General Assembly to appropriate the full TRS statutory contribution and to contribute $172 million and $115 million in additional contributions to TRS in the past two years has brought more stability to the System’s finances,” said Stan Rupnik, the Teachers’ Retirement System’s executive director and CIO, in a statement.

The pension fund has historically been underfunded, and Illinois ranks last among American states in ratio of unfunded liabilities to state GDP, according to the Equitable Institute’s “State of Pensions 2023” report. Illinois currently has $142.3 billion in pension liabilities, according to the Illinois General Assembly, a total that has tripled in the last 20 years.

According to the press release, the fund’s long-term liability stands at $148.4 billion at the end of fiscal 2023, an increase of 3.4% over the previous fiscal year. In fiscal 2023, TRS paid out $7.9 billion in benefits, and the fund noted it has made consistent, on-time, in-full benefits payments for 84 years.

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As of October 30, the Illinois TRS manages $65 billion in assets and provides retirement, insurance and disability benefits for more than 448,000 members.

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Home > News > Regulation > SEC Finalizes Treasury Clearing Rule
Regulation

SEC Finalizes Treasury Clearing Rule

The rule requires most secondary transactions to be centrally cleared by June 2026.
By Paul Mulholland



The Securities and Exchange Commission finalized a rule Wednesday that requires central clearance of a wider range of Treasury security secondary transactions, a market of approximately $26 trillion. The commissioners voted 4 to 1 in favor of the rule change.

The rule would require clearing agencies that provide counterparty services for Treasurys to require certain secondary market transactions to be cleared. Clearing agencies also will need to update their policies to “calculate, collect, and hold margin for their direct participants’ proprietary transactions separately from transactions submitted on behalf of indirect participants.”

Secondary transactions in Treasury securities do not need to be submitted for clearing when a counterparty is a central bank, sovereign entity, international financial institution or natural person.

According to the SEC, the rule will “enhance risk management for central counterparties” because of the relative transparency of the clearing process, compared with private trades. The rule would require secondary market participants to post collateral to back their positions or cap their use of repo trades.

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The SEC’s fact sheet on the amendments stated that the regulator views the changes as necessary, in part because the “U.S. Treasury market plays a unique role in the U.S. and global economy.” Central clearing for the Treasury market “can help increase the safety and efficiency of securities trading, reduce costs, and mitigate the potential for a single market participant’s failure to destabilize other market participants or the financial system.”

SEC Commissioner Caroline Crenshaw, who voted in favor of the rule, said in her statement Wednesday that the need for more clearing is in part motivated by past instances of market stress, including the “flash rally” in October 2014, a spike in repo rates in September 2019 and during the COVID-19 pandemic. She noted that, currently, about 13% of Treasury secondary transactions are centrally cleared.

Jay Gould, a special counsel with Baker Botts LLP, explains that the SEC and other regulators “are trying to address systemic risk” in this space. He says many investment banks and hedge funds are trading Treasurys “in dark pools,” where “nobody knows what’s happening.” This makes it difficult for regulators to assess and mitigate systemic risk in the economy, he says.

Gould expects the new rule to cover a “substantial majority” of secondary trades and to bring more transparency on “how leveraged the markets are,” which will help the Federal Reserve better understand the impact of interest rate changes, because they will have more data on leverage in the Treasury market.

Trading outside of clearing agencies can permit some hedge funds to trade using unreported leverage, making it harder for others to trade against them, Gould explains. He expects the rule to have the largest impact on hedge funds and other large institutional traders.

The SEC’s rule has a staggered implementation stage. Starting on March 31, 2025, requirements for clearing agencies to change management and access policies will come into effect. After that, direct participants of a clearing agency must clear secondary cash transactions by December 31, 2025, and repo transactions by June 30, 2026.

 

 

 

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