Pennsylvania SERS Reports 6.5% Return in 2016

Steps being made to successfully implement new law that moves new employees into hybrid pension plan.

The Pennsylvania State Employees’ Retirement System (SERS) returned 6.5% net of all fees and expenses in 2016, growing by nearly $1.6 billion, according to its 2016 Comprehensive Annual Financial Report (CAFR), released Monday.

This brings the total fund as of December 31, 2016, to $26.4 billion after paying out $3.2 billion in pensions to more than 127,000 retirees and beneficiaries. Of that $3.2 billion, $2.9 billion went toward Pennsylvania residents. However, the fund fell short of its 7.5% assumed long-term rate of return for 2016. In April 2017, the board lowered its assumed rate of return for the 2016 actuarial valuation to 7.25%.

In addition to 240,000 total members, SERS served 103 agencies and employers last year. Roughly 6,700 new retirees were added to the annuity payroll with an average annual pension of about $27,800. There were 4,000 retirees with an average yearly pension of $15,000 removed from the payroll.

SERS reported a funded ratio of 58.1%. The 2016 unfunded actuarial accrued liability was $19.9 billion, based on the actuarial methods used for funding purposes as of December 31. SERS’ net pension liability was $19.3 billion and its fiduciary net position as a percentage of the total pension liability was 57.8%.

Due to Governor Tom Wolf’s June 2017 signing of Act 2017-5 (formerly known as Senate Bill 1), most new hires starting January 1, 2019, and future retirees that choose to opt-in to the new plan will move into a hybrid retirement system where they will receive half of their benefits from the current taxpayer-funded plan and half from a 401(a) defined contribution plan. SERS says it will take the necessary steps to successfully implement these changes into its system over the next 18 months.

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