Problems mount for teachers' pension system


HELENA — It would take an immediate infusion of $633 million or a combination of other actions over time to prevent the state's teacher pension system from running out of money by 2055, administrators said Monday.

Officials with the Montana Teachers' Retirement System said they would work with members and lawmakers hoping to come up with solutions before the 2013 legislative session.

The actuarial report from last week painted a dire picture for the large pension system. An update is due later this month for Montana's other public employee pension systems.

The actuaries said that future school system contributions need to be increased by about 20 percent if there is no big lump sum contribution, or benefits must be decreased — or some combination of the three.

However, any move by the Montana Legislature to cut benefits for current employees is likely to end in a court battle because that benefit is considered a contract right that can't be changed outside negotiations.

David Senn, director of the Teachers' Retirement System, said the problem will be easier to fix the sooner action is taken. He said members will be quizzed in the coming months about their preferred solution as interim legislative committees analyze the problem.

The 91-page report from consultants hired by the retirement system made the predictions after calculating a lot of factors including the demographics of state employees, expected retirement trends and predicted stock market and investment earnings.

The report said that the long-term projected deficit, called the "unfunded liability," reached nearly $1.8 billion by July of this year, which was up from nearly $1.6 billion from a year ago.

That projected shortfall increased despite good investment returns for the year, because market losses from past years were factored under a system that aims to smooth the annual spikes in investment value.

Another stark finding in the report showed that TRS pension assets have just about peaked, and are projected to drop until the system runs out of money in 2055.

An interim meeting of lawmakers was told Friday that the system is getting to the point where payment to retirees will exceed contributions into the system. Without sufficient assets to pay all the current and projected retirees, the fund will "eat itself" until there is no money left, investment managers said.

The actuaries pointed to the possibility that "extraordinary" market gains could help the situation, if not alleviate it altogether. But the system assumes it will get a normal return of about 8 percent on investments, so the long-term gain would have to far surpass that figure in order to correct the problem.

Senn said policymakers should start making changes as soon as they can, perhaps with a phased-in combination of solutions.

"I think it is something that needs to be addressed in the 2013 in the session," Senn said. "The longer we wait the more difficult it will be become, and the more difficult the choices will become."


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