Thursday, June 16, 2016 – 12:00 p.m.
You know things are getting tough when a pension fund starts mentioning its 30-year average average return in its investment reports.
Now the San Bernardino County Employee’s Retirement Association (SBCERA) is doing just that.
The San Bernardino County, California public pension fund is listing that its 30-year average investment return is currently 8.8%.
It’s being listed to justify holding the funds actuarial investment return threshold at 7.5%. Meaning the fund must annually hit or exceed this mark to maintain its benefit payments.
It’s a return figure the fund will not hit for a second year in a row.
If the pension fund is lucky it will just breakeven for it’s current fiscal year, which ends on June 30.
The long-in-the-tooth 30-year number has been steadily falling for years and is the only measurement period that beats the 7.5% actuarial hurdle.
The funds 1-year, 3-year, 5-year, 10-year, 20-year, 25-year performance numbers are now under 7.5%.
The California Public Employees Retirement System (CalPERS), the nation’s largest public pension fund, has already reduced its investment return hurdle to 7.25%. CalPERS investment has actually bested the county’s and it even felt the need to lower it’s annual investment return target.
It’s time for San Bernardino County to take two actions.
First. Have the pension fund put in place a plan to gradually lower its investment return hurdle to 6.5%.
Second. The county needs to start paying enough into the system to bring it to 100% funded. Not just maintain it at near 80% funded.
Allowing the current $2 billion pension fund hole to continue isn’t in any way prudent.
The county just tentatively approved its 2016-17 fiscal year budget. In the budget presentation, County Chief Executive Officer Greg Devereaux told county supervisors that the pension funds poor returns will once again affect the general fund in its 2017-18 fiscal year, by requiring millions more in annual contributions.