Trustees of the Kansas Public Employees Retirement System on Friday decided to retain the current 7.75% investment return assumption rather than heed a recommendation of consultants to lower the foundational economic measure to more closely reflect national expectations.

The decision to maintain the status quo for three years avoided profound financial implications for KPERS, which serves 300,000 current or former public employees. A 0.25% reduction in the investment-return forecast would have driven up the system’s unfunded actuarial liability by $569 million and shrinkage of 0.5% would have equated a $1.2 billion surge in that unfunded long-term liability.

The decision by trustees was influenced by reports of a preliminary gross total return of 17.5% on KPERS’ assets in calendar 2019. That was a reversal from KPERS’ minus-2.6% in calendar 2018.

Cavanaugh Macdonald Consulting, an Atlanta firm providing actuarial and benefits advice to KPERS and other public sector pension plans, urged KPERS’ board to consider a downward revision to reflect a lower estimate of inflation and of real return on investment.

Read the whole article in CJ Online.

This article quotes selections from “KPERS trustees decline proposal to cut 7.75% rate of return assumption” by Tim Carpenter in CJ Online, January 17, 2020.