SBCO

Saturday, May 2, 2015 – 11:30 a.m.

San Bernardino County, California leaders can think again, if they thought its general fund was going to get a break from skyrocketing pension costs.

The county’s pension fund is staring at a potentially bad year, not horrible, in terms of investment return.

The latest report, set to be reviewed by plan trustee’s, shows that the San Bernardino County Employees Retirement Association (SBCERA) earned just 1.5% in its latest quarter ending on March 31, 2015.

For the current fiscal year, which ends on June 30, the fund has earned 2.3%.

SBCERA has just 59 days remaining in it’s fiscal year to hit an actuarial return target of 7.5% in order to support projected pension payments and expenses. A hurdle unlikely to be met, absent a significant rally in both the stock and bond markets.

The long-term investment return for the plan has been steadily falling since the crash of 2008, with the 10-year average annual return now sitting at 6.1%. That’s 1.4% below the 7.5% target.

The likely miss will place additional pressure on the county general fund, which must make up for the shortfall, to once again increase pension contributions into the fund. The county has been steadily increasing its annual pension contributions by tens of millions of dollars, in an effort to erase, over time, a nearly $1.9 billion unfunded liability (shortfall).

Right now it’s not working!

Any annual return below 7.5% drives the unfunded liability number higher.

Currently 35.8% of fund investments are in domestic and international equity investments (Stocks).

If the under-performance continues, SBCERA will have to lower it’s 7.5% target again (Previously 7.75%). But that move would increase the shortfall even further.

Interestingly, SBCERA hasn’t updated its investment performance on its website since the first quarter.