Two of the state's smaller retirement systems reported their investment returns for the past fiscal year, with one for highway employees hitting 16.2 percent and another for the judicial branch earning 8.23 percent, according to their officials.
The investments of the state Highway Employees Retirement System reached $1.47 billion in fiscal 2018, which ended June 30.
The Arkansas Judicial Retirement System's investments ended the fiscal year valued at $256.6 million.
By comparison, the Arkansas Teacher Retirement System has an investment portfolio of about $17 billion, and the Arkansas Public Employees Retirement System has a portfolio of about $9 billion. The larger systems haven't reported their investment performance for fiscal 2018 yet.
The highway employees system's investments increased by $118 million to $1.472 billion in fiscal 2018, and the 16.2 percent investment return was generated by strong active management and the fund's energy holdings, said Robyn Smith, executive secretary for the system.
"Of the $1.5 billion portfolio, energy was roughly $270 million with a return of about $57 million," she said.
The system's investment return compared with the 8.23 percent median return for similarly sized public pension systems last fiscal year and a 10.31 percent return ranking in the top 10 percent, based on figures from Callan Associates, Smith said. Callan is a Chicago-based investment consultant.
The system's projected annual investment return is 8 percent a year.
The system's investment portfolio included $1.02 billion in stocks and $283.1 million in bonds, and the rest was in cash, Smith said.
The state paid $19.2 million into the system last fiscal year, and the system's members contributed $9.1 million, she said. The system paid out $115.5 million in retirement benefits, she said.
In its latest actuarial valuation on June 30, 2017, the system had 3,663 working members with an average annual salary of $42,671 a year, Smith said. As of June 30, 2017, retired members included 2,411 service retirees with an average annual benefit of $33,625; 424 disabled retirees with an average annual benefit of $16,701; and 544 beneficiaries with an average annual benefit of $14,874, she said.
The system's unfunded liabilities totaled $229.5 million with a projected payoff period of 77.6 years as of June 30, 2017, Smith said.
Unfunded liabilities are the amount by which liabilities are exceeded by an actuarial value of assets. They are often compared to a mortgage on a house by actuaries. Under state law, public retirement systems aim for a projected payoff period for their unfunded liabilities below 30 years.
In the 2017 regular session, the Legislature and Gov. Asa Hutchinson passed legislation to change the annual fixed 3 percent cost-of-living increase for retired state highway employees to the lesser of 3 percent or the change in the consumer price index for urban wage and clerical workers.
Smith said the change in the cost-of-living formula for retirees "was beneficial and the system is always focused on reducing the unfunded liability."
JUDICIAL RETIREMENT
In fiscal 2018, the Arkansas Judicial Retirement Retirement System's investments increased $15.7 million in value to $256.6 million, according to Callan Associates.
The system's investment return of 8.23 percent last fiscal year ranked in the top 46 percent of similarly sized public pension systems, according to Callan Associates.
That's a good year overall, system board of trustees chairman Robert Edwards said during a recent meeting. Edwards is a circuit judge from Searcy.
Trustee Charles Yeargan asked Callan Associates Senior Vice President Ryan Ball about the impact of tariffs on investment markets.
Ball replied, "The current approach has a fair amount of uncertainty, which markets don't like."
On the other hand, Yeargan said, Apple has hit $1 trillion in stock market valuation. Yeargan is a circuit judge from Greenwood.
The system's domestic stock investments ended fiscal 2018 valued at $101.9 million, while its international stocks were valued at $40.5 million, its bond holdings were valued at $91.1 million, its real estate investments totaled $22.7 million, and cash and its equivalents totaled $178,333, Callan Associates reported.
The state paid $7.8 million into the judicial retirement system last fiscal year, while working members contributed $1.01 million, and court fees provided $586,818. The system paid out $12.76 million in retirement benefits, according to a report to the board of trustees.
In its latest actuarial valuation on June 30, 2017, the system included 140 working members with an average annual salary of $163,669, according to actuary Gabriel, Roeder, Smith & Co. The working members' average age was 59 with average service of 16.1 years.
The actuary said the system also included 147 retired members with annual retirement benefits averaging $87,755, for a total $12.9 million as of June 30, 2017.
Unfunded liabilities totaled $31.2 million with a projected payoff period of 20 years, Gabriel, Roeder, Smith & Co. reported. The projected annual investment return is 5.75 percent, said Gail Stone, system director.
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