State pension system investments post strong gains in FY ‘11

Daily Record Business Writer//July 21, 2011

State pension system investments post strong gains in FY ‘11

By Nicholas Sohr

//Daily Record Business Writer

//July 21, 2011

The cash and investments Maryland uses to pay retirement benefits to its former employees increased to $37.5 billion in fiscal 2011, a $6 billion gain that came during a time of strong growth and recovery in the stock market.

The Maryland State Retirement and Pension System’s 20 percent return on its investments during the 12 months that ended June 30 was outstripped by the S&P 500’s 26.8 percent growth during that time.

But the system’s performance easily topped its 14 percent growth the year prior and was welcome news to state officials concerned by ballooning pension obligations and a fund hit hard by the recession.

State Treasurer Nancy K. Kopp, who chairs the pension system board, said she was “very pleased with the fund’s performance.”

After being fully funded a decade ago, the pension system’s balance sheet began to slip, holding enough to cover 82.8 percent of its future obligations in 2006 and 80.4 percent in 2007. The slide was exacerbated by the recession and the funding level had dropped to 64.1 percent in fiscal 2010.

Pension system spokesman Michael D. Golden said the system would not be able to determine what the strong 2011 gains will mean for the funding level until December.

Lawmakers lessened the state’s pension obligations this year. Among other changes, they raised contribution rates, lengthened the vesting period for employees and capped cost-of-living adjustments at 2.5 percent during years when investment return targets are hit.

The fund saw its biggest gains in public equity investments in 2011. Those account for 47 percent of the fund, and posted a 29 percent return. Real estate investments, which are less than 6 percent of the fund, grew 23.3 percent.

Fixed income investments returned 4.8 percent and cash vehicles, 3.4 percent, the lowest returns in 2011 for the pension system.


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