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Maryland pensions see 10.6 percent return

ANNAPOLIS — An improving stock market helped Maryland’s $40.25 billion pension system enjoy a 10.6 percent return on investment in fiscal 2013, the Maryland State Retirement Agency announced Tuesday.

The return exceeds the 7.75 percent assumed actuarial return rate, a year after the return on investment fell below 1 percent.

Public equity drove the return, earning 19.1 percent. Returns on private equity, credit and real estate were all in double digits in the 12 months that ended June 30.

Maryland Treasurer Nancy K. Kopp, who chairs the Maryland State Retirement and Pension System Board of Trustees, said in a statement that the board “adopted a very balanced and diversified asset allocation.”

“The returns reflect both a healthy market environment on balance over the year and positive returns from active management,” Kopp said.

Last week, three New York-based agencies awarded Maryland its usual Triple A bond rating, but called attention to the state’s high pension liability and unrealistic 7.75 percent assumed rate of return.

Republicans in the General Assembly tried unsuccessfully this year to lower the rate to 6 percent, the rate used by businesses.

The pension system has also been underfunded since the “corridor” method went into use during the recent recession. The funding plan allowed the state to contribute less money to the pension system to avoid cutting money going into other programs and services.

The legislature voted this year to phase out that method and return to an actuarially determined funding plan, which many hope will correct underfunding.