The Truth - Page 1
The Teachers' Retirement System of Oklahoma is one of the five worst-funded state-run pension plans in the country.
Regardless of the standard used to compare pension programs, TRS is poorly funded. The state of Wisconsin Retirement Research Committee, a highly acclaimed survey of public pension plans, the NEA study "Characteristics of 100 Large Public Pension Plans," the 1996 Wilshire Report on State Retirement System and a report by R.V. Kuhns and Associates Inc. prepared for the Oklahoma State Pension Commission all rank TRS in the bottom five when available assets are compared to total liabilities.
As of June 30, 1998, the annual actuarial valuation of the Oklahoma Teachers' Retirement System reported assets of $4.085 billion, but liabilities of $8.891 billion.
This means TRS has $4.806 billion in unfunded liabilities. Liabilities are promises to pay benefits at some future date to educators who have earned a pension by their service to the state of Oklahoma. Certainly not all benefits are due at once, but will be paid out over many years. Over 33,000 retirees are currently receiving benefits and their liabilities comprise more than one-half of the System's total obligations. More than 80,000 active members represent the balance of liabilities. These members, who are still contributing, expect to retire or receive a lump-sum refund of contributions and interest upon termination of employment.
Liabilities are expressed in present dollar value, meaning the amount needed today to pay benefits as they come due. Assets are stated at market value, adjusted for a five-year phase-in of actual investment returns in excess of the 8 percent projected actuarial rate of investment returns. (Note: Actual market value as of June 30, 1998 was $4.884 billion. As of June 30, 1999, market value of assets available to pay benefits was $5.3 billion.)
If the Teachers' Retirement System is underfunded, how did it happen?
The System began in 1943 with unfunded liabilities. All active teachers were given credit for years already worked when the state established a retirement plan for educators. From the beginning, members have contributed a percentage of their monthly salary, with the state also making contributions, not to match members' money but supposedly to set up the reserves necessary to pay benefits as they come due. In most years, the state has not contributed the necessary amounts. During the last 30 years, the state of Oklahoma has met the actuarial employer contribution only five times. In addition, new or improved benefits were routinely enacted, increasing liabilities with little or no regard for the cost of the new benefits.
When this paper was prepared, June 30, 1999 assets and liabilities were not available. Assets of June 30, 1999 actual value of assets was $4.708 billion and actuarial accrued liabilities $9.458 billion. The unfunded liability as of June 30, 1999 was $4.750 billion
