Tag Archives: TCRS

Armstrong’s state pension benefits uncertain

Former Rep. Joe Armstrong’s state pension would provide him with $28,744 annually under the application he has filed, but state officials have not decided whether he is entitled to receive the benefits after a felony conviction for filing a false federal tax return.

Shelli King, spokeswoman for the Tennessee Consolidated Retirement System, said Armstrong’s application was received on Tuesday and officials are conferring with attorneys to decide whether it will be approved.

King said that Armstrong’s application opts for receiving maximum monthly benefits with no survivor benefits upon his death. If approved, she said in an email, “Rep. Armstrong will receive $2,395.34 per month based on 27 years, 10 months of service in the General Assembly” – or $28,744.08 per year.

Those making the decision will include state Treasurer David Lillard, who oversees the pension system, TCRS Executive Director Jill Bachus and others, she said, and “not just a single person.” She estimated that the process of making a consensus decision – one that might generate political controversy — could take four to six weeks.

Under state law, a legislator forfeits his or her pension benefits when “convicted in any state or federal court of a felony arising out of that person’s official capacity, constituting malfeasance in office.”

That raises the question of whether Armstrong’s federal court conviction arises out of his “official capacity” as a state legislator. The filing of his tax return, of course, was not an official duty as a legislator.

But the conviction was based on a failure to pay federal income taxes on more than $300,000 profit Armstrong made by buying, through a tobacco wholesaler, Tennessee cigarette tax stamps at the rate prior to a 2007 increase in the state cigarette taxes – which he supported as a legislator – then selling them after the increase was approved. Continue reading

TCRS missing investment return goals

The Tennessee Consolidated Retirement System, which provides pensions for more than 370,000 people around the state, has now posted anemic returns and missed investment targets for two years in a row, reports The Tennessean, and this could impact its ability to meet obligations to state workers, teachers and retirees.

In 2015, the fund generated returns of 3.3 percent, falling short of its 7.5 percent target. In the most recent fiscal year, ending June 2016, the pension earned 2.8 percent.

Despite the two years of lackluster results, Tennessee Treasurer David Lillard says the state’s pension remains healthy and that the stronger returns in previous years help cushion the recent blows. In 2014 and in 2011, for example, the TCRS more than doubled expectations, reaping nearly 17 and nearly 20 percent returns.

“The liability horizon we invest for is a very long-term horizon,” Lillard said. “Unless you are an extremely badly funded pension, you have an ability to ride out any downturns that may occur.”

Across the nation, public pension funds have struggled as interest rates stay at record lows, people live longer and lower contributions from past years haunt current returns. Moody’s Investors Service estimates unfunded public pension liabilities totaled $1.3 trillion in 2014.

In fact, Lillard calls the pension’s strength “a point of pride for Tennesseans” and his confidence in the state’s pension is not unfounded. The state has a AAA bond rating from Standard & Poor’s, Fitch Ratings and Moody’s and TCRS is ranked as one of the top four funded pensions in the nation by the Pew Charitable Trusts. As of last year, Tennessee was 99 percent funded, according to Lillard’s office, compared to the national median of 59 percent funded, reported by Moody’s.

Even so, Tennessee’s investment returns over the past 10 years is 6 percent, failing to meet the 7.5 percent target.

“We are the best house in a bad neighborhood,” said Stephen Frohsin, a principal at Woodmont Investment Counsel in Nashville.

With Cities Pulling Out of State Pension Plan, New Options Offered

The Tennessee Consolidated Retirement System bills itself as “one of the best-funded pension plans in the nation,” but some local governments have been pulling their new hires out of the plan, reports Hank Hayes.
The city of Kingsport did. So did Johnson City and Tri-Cities Regional Airport. The reason: These cash-strapped political entities have found their contributions into TCRS to be too costly.
“Fifty-four (governmental entities) were at or above 15 percent of payroll (with TCRS employer contributions). … Speaking as a former county commissioner, that tells me they are under a bit of funding pressure,” said Tennessee Treasurer David Lillard Jr., who oversees TCRS.
For instance, TCRA’s TCRS contribution expense is almost 18 percent of payroll. The airport decided to go with a different defined contribution plan that would have a maximum 9 percent of payroll cost.
Kingsport’s and Johnson City’s TCRS pullout, in particular, got Lillard’s attention.
“These are all issues of concern to us because these are significant-size local governments, and they are entities participating in the system for many, many years — some going back to 1948,” he noted.
So Lillard hit the road last fall and did listening sessions with more than 200 local government officials about their future with the state’s pension plan.
Proposals from those meetings resulted in legislation passed this year to create three less costly investment options.
TCRS says the bill, scheduled to go into effect on July 1, would not apply to current local government hires, state employees, K-12 teachers or higher education workers. No local governments are required to make any changes. The provisions are only effective if adopted by local governments, according to TCRS.

TN Pension Plan Deemed in Good Shape Despite Stock Market Turmoil

By Lucas Johnson, Associated Press
NASHVILLE, Tenn. — Tennessee financial officials say they’re confident the state’s pension plan is in good long-term shape despite the recent Wall Street sell-off and the likelihood of continued stock market volatility.
The financial storm is causing uneasiness among many state fund managers still trying to recover from steep losses during the recession. California’s main public employee pension fund, the nation’s largest, has lost at least $18 billion in its stock portfolio since July 1.
Some state officials are concerned taxpayers may have to foot the bill for billions in unfunded liabilities for government retirees.
But Steve Curry, assistant to the Tennessee treasurer, said Friday the state is faring better than most because of its conservative portfolio, which is made up of about 42 percent bonds.

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Lillard: TN Pension Plan in Far Better Shape Than Some Claim

While state Treasurer David Lillard says the $32 billion Tennessee Consolidated Retirement System ranks among the best pension plans in the nation, there’s also some bad news.
From Richard Locker:
The plan has been fully funded since its creation in 1972, but two years of bear-market losses in its investment portfolio — minus-1.2 percent in 2008 and minus-15.3 percent in 2009 — left it with a $2.7 billion unfunded liability on paper that the state will amortize over 20 years.
That number could be reduced if investment earnings average better than the projected 7.5 percent. (Earnings rebounded to 10 percent in fiscal 2010 and 13 percent the first half of fiscal 2011.)
The $2.7 billion is far less than a $30.5 billion shortfall attributed to the Tennessee plan by the conservative American Enterprise Institute and $23.2 billion claimed by a pair of Northwestern University economists whose analysis Lillard said was flawed. Both claims have been used by a coalition of “free market” groups campaigning to end pensions for public workers.
Lillard, a Republican and former Memphis tax attorney, said the TCRS has a “conservative benefit structure that does not produce pension abuse found in several other states. We don’t have, as California does, any fire chiefs who have retired with $200,000-plus in pension benefits.”
…TCRS will pay out just over $1.5 billion to 112,133 retirees this year, an overall average of about $13,720 a year. Most covered retirees worked for the state for at least five years (the minimum to qualify) but less than 30, or retired years ago at lower benefit levels.

Senate Panel OKs Ending TEA Seats on State Retirement System Board (Guess What: Party Line Vote)

The Senate Education Committee approved Wednesday a bill that eliminates a requirement in current law that four members of the state retirement system’s board of directors be designated by the Tennessee Education Association.
The bill (SB102) was approved on a party-line vote, six Republicans voting for it and three Democrats against.
Sponsor Sen. Delores Gresham, R-Somerville, said the move would eliminate special treatment for TEA, which has 52,000 teacher members. Instead of requiring that TEA designate members for appointment to the Tennessee Consolidated Retirement System board, the bill allows appointment of any teacher.
Jerry Winters, lobbyist for TEA, noted that various other groups also have designated membership on the board, including the Tennessee Municipal League and the Tennessee County Services Association. If TEA is to be eliminated as having designated seats, he questioned why the others are not similarly treated.
“It sure looks like we’re singling out teachers,” said Sen. Andy Berke, D-Chattanooga.
Gresham said another committee is considering legislation that would end designation of seats for specific groups.
The TCRS board has 20 members. Of the four filled by TEA members, two must be active teachers and two must be retired teachers.
Gresham’s bill is one of several filed this session by Republicans to strip TEA of special status in state law. Winters and others contend the measures are politically motivated.

Change to State Pension System Discussed

State Treasurer David Lillard says Tennessee could reap substantial pension savings by diverting new employee and teacher hires into a 401(k)-style plan where the state contributes money but doesn’t guarantee benefits.
From a Chattanooga TFP story:
Lillard told the GOP-run Senate Finance Committee that the $32 billion Tennessee Consolidated Retirement System plan remains one of the “best funded” plans among states. The plan provides fixed benefits to 112,000 retired state and local workers as well as retired educators.
But Lillard warned that state and local governments face new contribution-rate pressures largely due to the plan’s investment losses during the recession.
“We fared much better than other pension plans did for the most part, but it still is a substantial loss in terms of this plan,” Lillard said. Tennessee’s pension has an estimated $2.7 billion accrued state liability that will have to be paid for or amortized over a 20-year period, he said.
Tennessee’s pension has an estimated $2.7 billion accrued state liability that will have to be paid for or amortized over a 20-year period, he said.
Senate Minority Leader Jim Kyle, D-Memphis, later said it appeared that Republicans are laying the “groundwork … to justify doing away with a defined-pension plan. Whether that’s the right thing to do or not, we’ll just have to see.”