Despite the fact that a number of Texas’ 93 state and localpension funds reduced their target rate beloweight percent, a new report from the Texas Association ofPublic Employee Retirement Systems says that the funds combined in 2016–2017 to maintainpositive trend performance in the key metric recommended by theTexas Pension Review Board.

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The reduction in the target rate, the report finds, despitebeing a conservative move that, “mathematically, could have movedpension systems in undesirable directions,” did not interrupt the“steady trend data.”

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According to the report, TEXPERS based its assessment on thePRB’s year-over-year comparisons of pension funds’ amortizationperiods—the number of years needed to pay off all present andfuture projected benefits to employees.

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The PRB says that amortization periods are the single “mostappropriate” measure of public retirement systems’ health.

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Two pension systems that moved out of the infinite category andthe >40<infinite category into the >25<40 year categoryshowed the most substantial improvements in the 2016–17 period, thereport finds.

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It adds that two more systems now are in the PRB’s recommendedcategory, the greater than zero, less than 15-year category.

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The TEXPERS report indicates that a significant number ofsystems have reduced the rate of return they seek, with just 24systems now aiming for average rates of return of 8 percent ormore. In the last PRB report, 35 systems sought an average rate ofreturn of 8 percent.

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Most systems—42 altogether—now target an average yearly returnof 7.50–7.99 percent, compared with 31 in the prior report. Thetargets, the report says, are a major factor in calculating thecontribution rate needed from employees and their city sponsor.

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“The Pension Review Board recognizes that amortization periodtrends matter more than accountants’ moment-in-time snapshots ofunfunded liabilities when assessing pension fund health,” TEXPERSexecutive director Max Patterson said in a statement, adding, “Thishigh-level overview of pension systems’ health continues to warrantthe trust which lawmakers place in local pension boards to deliverreasonable earned benefits to police, firefighters and municipalemployees at minimal contribution from taxpayers.”

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The full report and charts are available via TEXPERS.

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