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Month: October, 2012

SDRS state employee representative review of Oct. 18 SDRS meeting

Thursday, October 18, 2012

After all was said and done very little changed at the South Dakota Retirement System meeting on Wednesday, Oct. 17. Benefits were left untouched and will probably remain that way this year. The day was spent trying to get a clear picture of where the system stands. In a system that has so many variables, it is difficult to determine if we currently have enough invested and are collecting enough contributions to sustain the system into perpetuity. Assumptions such as investment returns, retirement ages, final average salaries, mortality rates and many others have been set. The problem is we are trying to determine what will happen over the next 30 to 40 years. If our estimates miss even slightly when it is multiplied by the size of our system, the numbers become huge.

In the past, SDRS had reserves that could be tapped when assumptions were not met, but after several years of tough economic conditions, those reserves are gone. This makes our assumption more important. In the end, the investment returns, final average salary and the numerous items we give an “educated guess” to will either be higher or lower than what we assumed. If we are wrong in a good direction, such as investment returns at 8% rather than 7.5%, we will have more money to pay benefits. But if we are wrong the other way, we better have contingency plans in place to handle the shortfall.

Over the next year and possibly longer we will try to formalize these contingency plans. We also will be looking at each benefit to see if we have any benefits that would be considered “over generous” or “inequitable”. It is possible that there could be changes in the system to help build more of a comfort level or conservatism into the system. This process should be tracked by all SDRS members, and this is a good point to add our opinions about the direction the system should go. We can have a lot more influence at the early stages of the process than later, after other ideas have built momentum.

In the current political climate of our nation, pension systems such as SDRS are under attack. If we cannot make this system work within our current resources, the system will go away. SDRS is viewed as a model system on the national scene. We have shown that a pension system run wisely can work and provide a good value to its members and to taxpayers. We must continue to be proactive to maintain the system and to provide the best possible benefit to our members.

- Eric Stroeder, State Employee Representative, SDRS Board of Trustees

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