Connecticut Gov. Dannel P. Malloy and the State Employees Bargaining Agent Coalition have agreed to modify the funding calculation and amortization schedule for the $11 billion Connecticut State Employees Retirement System, said news releases issued by the governor's office and SEBAC.
The agreement includes recommending to the state retirement commission to reduce the assumed rate of return to 6.9% from 8%; transitioning from level percent of payroll to level dollar amortization over five years; moving to entry age normal cost methodology; maintaining 2032 as the payoff date for the unfunded liability accrued through Dec. 31, 1983 (about $4.3 billion in unfunded liability); and extending the amortization period for the balance of the unfunded liability in a new 30-year period to 2046 from 2032.
“The prior funding system used a level percent of payroll calculation that back-weighted repayment of the debt, resulting in payments in the years approaching 2032 that would have grown precipitously,” according to the release from the governor's office.
The new agreement does not affect benefits or employee contributions.
SERS had a 41.5% funding ratio as of June 30, 2014. The use of level percent of payroll has added a combined $2.3 billion in unfunded liabilities to SERS, while underpayment of the required contribution, however calculated, has added a combined $3.2 billion in unfunded liabilities to SERS, the releases said. Time periods for the gains in unfunded liabilities were not provided.
All told, Connecticut has an unfunded liability of nearly $15 billion for SERS, which is part of the $30 billion Connecticut Retirement Plans & Trust Funds.
The agreement has been sent to the General Assembly for approval.
Further information was not available by press time.