AP News

SD Retirement System has good investment return

PIERRE, S.D. (AP) — The South Dakota Retirement System's assets have grown to an all-time high after earning 12.4 percent on investments through the first seven months of the financial year, an official said Monday.

The system's assets peaked at about $8.2 billion in 2007 and then plummeted during the national recession, but those assets have now grown to more than $8.5 billion. That's up from $7.8 billion at the start of the financial year July 1, a gain of roughly $700 million after taking into account investment gains and benefits paid to retirees.

"We've worked our way back, but it was a hard road," said Rob Wylie, executive director of the Retirement System, noting that the system had some big losses and big gains in some recent years.

Wylie said the system is now about 98 percent funded, which puts it in much better shape than most similar pension plans in the nation. That means its assets are about 98 percent of the value of all potential future benefits to be paid to retirees in state and local agencies.

The numbers reported to a South Dakota legislative committee provide only a snapshot of the Retirement System's financial condition. The system's official condition and the cost of living increases granted in benefits are based on its status on June 30 every year.

The system has 75,000 members, and most are still working. It includes employees of state government, cities, counties and school districts.

State Investment Officer Matt Clark told the Joint Appropriations Committee last week that investment returns go up and down from year to year, but investments are aimed at meeting the long-term goal of supporting benefits paid to retirees.

"All we care about is winning over the long term. The decades are what we have our eye on," Clark said.

After the system's assets peaked before the national recession, they fell to $5.6 billion by June 2009. After gaining 18.7 percent three years ago and nearly 26 percent two years ago, it held about $7.9 billion as of June 30, 2011. Its value stayed about the same in the year ending last June.

Clark told lawmakers the Investment Office buys stocks when prices are low, which sometimes leads to poor earnings until the stock market rises again. In the long run, South Dakota's system ranks among the nation's best in terms of investment earnings, he said.

"Basically, we put you through a lot of pain and anxiety because of our investment approach," Clark told the Appropriations Committee. "But it's paid off in huge dividends in terms of the income."

Wylie noted that the system previously had a goal of averaging a 7.75 percent annual return on investments, but that has been changed to 7.25 percent for the next five years. The system also lengthened the presumed life expectancy of its retirees, which in turn increases the assumed amount of benefits to be paid.

When the Retirement System is fully funded, pension payments increase by 3.1 percent the following year. Because it was only 93 percent funded last June 30, benefit payments will rise by only 2.1 percent on July 1 this year.

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