Thursday, December 9, 2010

Week In Review

State Capitol Week in Review

LITTLE ROCK – The Arkansas Teacher Retirement System has about $10.8 billion in assets and more than 72,000 active members. It pays monthly benefits to almost 32,000 retirees.

The system is in good financial condition, especially compared to public retirement systems in other states. However, the value of its assets has suffered sporadically over the past two years, since the economic downturn caused volatility in the stock markets.

In order to continue holding down costs, the Board of Trustees will ask the legislature to make changes in the system's rules.

At a recent meeting the system's board of trustees agreed on a package of bills for the legislature to consider during the 2011 regular session. The board will find a legislative sponsor to introduce the bills, which will be thoroughly reviewed by members of the Joint Committee on Public Retirement and Social Security Systems. Bills that cost the system money will be analyzed for their financial impact over the long term.

Of particular interest to local school districts is that the system will not seek an increase in the amounts that districts contribute. Now, school districts contribute an amount equal to 14 percent of their payroll. Statewide, the total contributions amount to $378 million.

An increase in the contribution rate can be avoided if the stock market improves, increasing the value of the system's assets. They include a variety of investment types, such as stocks, bonds and real estate.

For the quarter that ended on September 30, the system's investments earned 8.7 percent. A consultant told the board of trustees that 8.7 percent was in line with the average growth of other public retirement systems.

During the 2011 regular session the legislature will consider many bills recommended by the retirement system to reduce costs. One would restrict an individual's ability to "unretire" and go back to work as an active member of the system.

Another would make it more expensive for active members to buy years of service. Now, when a member buys years of service in order to increase their retirement benefits, the system pays for 55 percent of the cost of the actuarial analysis required. If they have to pay 100 percent of that cost, fewer will choose to buy years of service because the costs would become more in line with what it costs to buy an annuity.

Another proposal would require teachers and other active members to work at least 160 days a year to get credit of a year toward their retirement. The current requirement is 120 days. This change would affect an estimated 2,000 to 3,000 members.

The system will ask for a "fairness" bill that allows it to offer the same benefits to members who serve in National Guard units of other states as are offered to members who serve in the Arkansas Guard. For example, a Fort Smith teacher serving in an Oklahoma Guard would be treated like a teacher serving in an Arkansas unit.

Also, the system proposes a change in the law governing payment of $10,000 in death benefits. If a member accrues 15 years of contributory service, they would qualify for the full $10,000. This change will benefit members who have both contributory and non-contributory years of service.

On average, retired teachers in Arkansas receive $20,041 a year in benefits.

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