Connecticut Treasurer Denise L. Nappier released a preliminary analysis on Friday of the governor's proposals for funding the state's largest pension plans with her recommendations for maintaining the integrity of the plans.
At a meeting of the state's investment advisory council on Wednesday, Ms. Nappier, principal fiduciary of the $29.6 billion Hartford-based Connecticut Retirement Plans & Trust Funds, expressed support for reforms that would reduce the investment return assumption to 7% from 8% for all of the plans and change the method for calculating Connecticut's contributions to the $10.4 billion State Employees' Retirement Fund to a set dollar amount from a set percentage of payroll.
Ms. Nappier also supported reforms that would convert to a rolling amortization period when the funded status of SERF reaches an adequate level at 75%, which would delay full funding but place less pressure on financing the unfunded liabilities by smoothing annual pension contributions and avoiding a balloon payment when compared to the current closed 2032 amortization schedule; and avoid such “gimmicks” as retirement incentive programs like early retirement with lower benefits.
In October, Gov. Dannel P. Malloy proposed to split SERF into two plans in order to make the pension fund more affordable. At the investment advisory committee meeting, Ms. Nappier expressed concern over the proposal, stating that such a move “is a material departure from the hard-fought disciplined funding approach to the state's pension liabilities” and “raises many serious legal and implementation questions,” the news release said.
Regarding the $15.8 billion Teachers Retirement Fund, Ms. Nappier said she agreed with the advice of the bond counsel for the treasurer's office that it is unlikely that changes can be made to either the method of calculating the state's contribution or amortization period for funding the plan — currently expected to be fully funded in 2032. Either change, in the counsel's view, would likely violate a covenant adopted in conjunction with the issuance of pension obligation bonds in 2008.