Illinois Teachers pension fund cuts assumed rate of return to 8%

Illinois Teachers' Retirement System, Springfield, at a special meeting on Friday lowered the assumed long-term rate of return on the $36 billion pension fund to 8% from 8.5%, confirmed David Urbanek, a spokesman.

Trustees approved the reduction by an 11-2 vote.

Mr. Urbanek noted that the most significant impact of the new assumed rate is that it will increase the retirement system's long-term unfunded liability to 57.6% from the current level of 54.8%.

Illinois' required annual contributions beginning in 2014 will increase as a result of the lower assumed return rate, to $3.37 billion compared to $3.07 billion using an 8.5% return assumption.

“The assumed rate of return greatly influences the financial future of TRS,” said Richard W. Ingram, executive director, in a news release from the pension fund. “Reducing the rate … to 8% is a prudent move that balanced reality with the needs of TRS members.”

Buck Consultants, the retirement system's actuary, recommended lowering the assumed rate at the board's Aug. 24 meeting, but trustees postponed a decision as they waited for more analysis by TRS staff, Mr. Urbanek confirmed.

At Friday's special meeting, trustees also approved having actuarial studies completed every three years rather than the five years required by Illinois state law, because they are concerned about “the volatility of the world economy,” according to the news release.