CARSON CITY— Nevada’s public employee retirement plan saw its overall long-term liability grow to $12.9 billion in Fiscal Year 2013 from $11.2 billion the year before, a new report shows.
The percentage of long-term funding also declined, from 71 percent in Fiscal Year 2012 to 69.3 percent in the year that ended June 30, the actuarial valuation report from Segal Consulting shows. The plan covering about 98,512 active state and local government workers and 49,546 retirees or their beneficiaries was 77.2 percent fully funded in 2007, and hit a high of 85 percent full funding in 2000.
The growing long-term liability could translate to higher employee contribution rates in the next legislative session to keep the retirement fund healthy. Higher rates mean more taxpayer money being spent on the retirement plan and less funding for other needs.
While the liabilities of the Nevada Public Employees Retirement System grew over the past year, so did the assets, climbing to $29.1 billion in Fiscal Year 2013 from $27.4 billion in Fiscal Year 2012, the report shows.
The actuarial evaluation report was presented at the same meeting where the board heard a separate review from an independent consultant, AonHewitt, that indicates the PERS plan will be fully funded over the next 30 years if all the assumptions, including an anticipated 8 percent rate of return on investments, are met.
The AonHewitt report, which compared the Public Employees’ Retirement System to comparable public pension plans around the country, also found that the plan’s actuarial funding policy is “best-in-class.”
But Assemblyman Randy Kirner, R-Reno, who attended the PERS board meeting, said the actuarial valuation report suggests that the financial hole for the plan is growing. Kirner has been an advocate for major changes to the plan to lessen the long-term taxpayer risk of paying for the public employee pension benefits.
Kirner said the AonHewitt analysis compared Nevada’s plan to other public pension plans. What is needed is a review of whether the assumptions for the plan, such as the 8 percent rate of return on investments, are valid, he said.
The board overseeing the massive CalPERS plan in 2012 reduced its estimated rate of return to 7.5 percent from 7.75 percent, he said.
The lower the rate of return for a public pension plan, the bigger the long-term liability becomes, requiring higher contribution rates.
Mark Vincent, chairman of the PERS board and the chief financial officer for the city of Las Vegas, said the biggest factor in the increasing liability is a lack of growth in the public employee job sector.
“Payroll is not hitting what we assumed it would hit based upon prior studies because employment is depressed in the public sector,” he said.
If that situation continues, the PERS board will respond and adjust the assumptions, Vincent said.
“We’re not in distress,” he said.
Contact Capital Bureau reporter Sean Whaley at firstname.lastname@example.org or 775-687-3900. Follow him on Twitter @seanw801.