Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. PENSION FUNDS
December 18, 2018 12:00 AM

Stress test shows divergence in Connecticut funds' resilience

James Comtois
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Getty Images/iStockphoto

    Changes made to Connecticut’s $13 billion State Employees’ Retirement Fund, Hartford, has protected the fund from risk even during bear markets, while the state’s $18.7 billion Teachers’ Retirement Fund could face insolvency during a recession if reforms aren’t made, said the results of a pension stress test conducted by The Pew Charitable Trust on behalf of the state.

    While the state’s current level of contributions helps to diminish the likelihood of fiscal distress, low funded levels might result in persistently high costs for decades if investments underperform, the report stated.

    Results of Pew's stress test showed recent reforms to SERS led to positive results in managing financial market volatility and mitigating investment risk. In contrast to TRS, the new funding policy for SERS translates into a relatively stable level of required contributions under a range of scenarios.

    In addition, placing new state employees into a hybrid plan, as has been proposed, could significantly mitigate risk of higher employer costs, according to test results. Pew estimates this could lead to savings of $1 billion to $2.5 billion over 30 years, depending on how investments perform.

    "This analysis demonstrates that actions we took to restructure and reform the State Employees Retirement System have been incredibly effective and provide the path for what we need to do with the Teachers Retirement System to greatly improve the state's financial future," said Connecticut Gov. Dannel P. Malloy in a news release announcing the stress test.

    Another finding from Pew's analysis is that Connecticut's state budget is exposed to potentially unaffordable spikes in required pension contributions in scenarios where investment returns fall short of expectations. Pew's analysis estimates that in a 5% investment return scenario, total employer contributions required under state policy would increase to more than 19% of revenue by 2028 from its current level of 13%.

    In addition, although SERS has minimal exposure to solvency risk or fiscal distress under an adverse recession scenario that includes an initial 25% decline in pension fund assets followed by low returns after an initial recovery, TRS could face a significant risk of insolvency if the required contributions are not met.

    Mr. Malloy added: "Our pension problems have haunted our state and impeded growth for decades, but by fully funding our obligations, reforming the amortization methods to stabilize annual payments, mitigating additional growth in the unfunded share and creating a hybrid system … we have solidified our state employees' system."

    Related Articles
    Connecticut treasurer weighs in on proposals for funding state pension plans
    Connecticut governor, unions agree to modify pension funding calculation
    Connecticut Legislature approves plan to restructure state pension obligations
    Connecticut General Assembly approves new hybrid plan, contribution and COLA ch…
    Connecticut governor proposes reforms to state teachers fund in conjunction wit…
    Recommended for You
    ONLINE_190219888_AR_0_SPSOBFOFIEWY.jpg
    Public pension funds lowered expectations for returns as expenses spiked in fiscal 2022
    Sylvester McClearn
    New York State Common selects interim director of emerging manager program
    Masataka Miyazono, president of the Government Pension Investment Fund, at a Tokyo news conference on July 3, 2020.
    GPIF reports another quarter of negative returns
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    Morningstar Indexes' Annual ESG Risk/Return Analysis
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing