All public pension valuations severely understate liability values and contribution ‘requirements’ to cater to the government/client’s whims so when reviewing the actuarial reports for the Connecticut Teachers’ Retirement System (TRS) you have to ignore most of the numbers and concentrate on deposits and payouts to tell you the real story:
Back in 2000 the TRS reported having $11 billion in assets and, except for 2008 when it got $2 billion from a Pension Obligation Bond (POB) sale, there has always been a substantial net outflow (averaging about $500 million) annually. You would expect assets to be close to depletion by now but as of 6/30/14 the TRS claims to have over $16 billion (including that POB money that still has to be paid back by taxpayers) in assets due to exceptional investment earnings.
Without changes to the nature of the plan you can expect benefit payouts and participant deposits to be steady over the years so, projecting forward, the TRS could still avoid bankruptcy assuming:
- continued miraculous investment growth, and
- Connecticut coming up with over four times more in deposits annually in 2027 than they are putting in now.
Neither appear likely.