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RSA reports $8.5B returns in 2021

By MARY SELL, Alabama Daily News

The Retirement Systems of Alabama reported historic returns in 2021: 22.62% for the Teachers’ Retirement System and 22.18% for the Employees’ Retirement System.

The returns are the best in decades, but David Bronner, RSA’s chief for nearly 50 years, warns members and state leaders not to expect any windfalls.

“We’re trying to build something that’s solid and will be there long after I’m gone for the future of the young employee who is just starting this week or next month,” Bronner said in an interview with Alabama Daily News. “And so we’re going to have ups and downs.”

The returns translate into a total investment income of about $8.58 billion. According to preliminary numbers reported to the RSA boards in September, TRS had an investment income of $5.7 billion for the 12 months ending that month. For ERS, it was $2.8 billion.

These are the highest returns on record since 1982 for TRS and the highest on record for ERS, according to the system.

“All pension funds across the United States did fantastic,” said Bronner, who noted the last two years have been some of the most volatile he’s seen.

The systems are funded by three sources: Investments, employers and employees. The 2021 returns won’t change anything for the later two, Bronner said. 

His message to lawmakers is to be careful not to promise anything to retirees based on one great year. As of the end of September, TRS’s unfunded liability was $11.072B and its funded ratio was 70.7%; ERS’s unfunded liability was $6.295B and its funded ratio was 68.2%.

The 2021 return’s impact on those liabilities won’t be known until the completion of the fiscal year 2021 valuation, likely next spring.

In September, the RSA boards made some actuarial assumption changes, including lowering the assumed rate of return to 7.45% and adopting new mortality tables that assume longer lives of retirees.

“Most of these assumption changes are conservative changes that will ensure the continued financial viability of the system, but that do increase the liabilities of the system,” said Neah Mitchell, the legislative counsel for the Retirement Systems of Alabama. “The excess FY21 returns may offset most of the impact from these changes, which otherwise could have increased the unfunded liability and employer contribution rate. Essentially, these returns can help ‘pay’ for making some of the assumption changes.”

Bronner said he’s had four years where RSA lost money: 2000, 2001, 2008 and 2009.

Like in bad years when losses are spread over five years, Bronner said the 2021 gains will be spread over the same time period.

That keeps RSA from telling lawmakers the systems “don’t need a damn dime” one year and asking for a billion dollars the next.

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