As markets fell, SDRS lost some $1.7 billion

Capitol News Bureau
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PIERRE, S.D. (KELO) — The trustees who oversee the South Dakota Retirement System will talk about possible corrective actions when they meet next month as the COVID-19 crisis continues.

The April 2 teleconference starts at 11 a.m. CT. Materials for the meeting will be available beforehand on the SDRS website.

The pension plan covers approximately 90,000 current and former employees of about 500 participating government units in South Dakota, including state government, many municipal and county governments, many K-12 school districts and various special units — the equivalent of about one of every 10 South Dakotans.

As of Tuesday, the approximate value of the SDRS trust was about $10.75 billion, according to Travis Almond, the system’s executive director. It had been about $12.47 billion as of the June 30 end of the 2019 fiscal year.

Almond said the trustees will be discussing possible 2021 legislation at each of their board meetings throughout the year.

“Any potential legislation will be dictated by our funding status as of June 30, 2020. SDCL 3-12C-228 guides SDRS and requires recommendations to the Legislature for corrective actions if acceptable funding conditions are not met,” he said.

He continued, “For example, should SDRS fall below 100 percent funding as of June 30, 2020, the board of trustees would be required to make corrective action recommendations to the Legislature to ensure the sustainability of lifetime benefits to all SDRS members.

“The board has a plan in place for possible recommendations if SDCL 3-12C-228 conditions require action. Coincidentally that plan has been under review for discussion with the board in April prior to the economic downturn. We anticipate the board will finalize the updated plan in June,” he said.

The Legislature made significant changes in 2008 that included requiring the annual review. That came after financial problems surfaced, as employees were briefly retiring from SDRS-covered jobs so they could collect their benefits, and then returning to work for the same employers.

The system has a history of strong returns that became somewhat erratic in the past two decades. They ranged from a 20.4 percent loss in 2009 to a 25.8 percent gain in 2011. The past three years have seen gains of 13.8 percent in 2017, 7.9 percent in 2018 and 4.9 percent in 2019.

State investment officer Matt Clark and the state Investment Council that oversees South Dakota’s policies take a contrarian approach. Clark and his staff moved many millions of dollars from cash into the markets during the past week as prices plummeted.

The Legislature in 2016 split the SDRS plan into two benefit structures: Foundation for people already in the system before July 1, 2017, and Generational for people hired for the first time July 1, 2017, or after.

Almond, whom the trustees selected last year to succeed the retiring Rob Wylie, said each member and every dollar are tracked, but the overall membership numbers are reconciled at the end of each fiscal year.

As of June 30, 2019, SDRS had 89,685 total members, according to Almond: 41,500 active; 18,989 inactive who are due a future benefit or refund; and 29,196 recipients of monthly benefits.

Most of the members are covered by the Foundation structure. At June 30, 2019, the newer Generational design had 7,468 active members, or about 18 percent, and 1,523 of the inactive membership. No monthly benefit recipients were under the Generational design, Almond said.

The system is funded through a combination of employee and employer matching contributions. Benefits are paid depending on a variety of factors such as class, years of service and final average compensation. Disability and death benefits are also paid.

“SDRS was 100 percent funded going into this COVID-19 crisis and as a result, better prepared than most plans to weather an economic downturn, which is a fundamental reason why SDRS advocates for a 100 percent funded position,” Almond said.

“SDRS is not immune to the economic challenges that will arise, but based on our fully funded status, conservative actuarial assumptions, and variable benefit design, we are better positioned to weather these sort of economic downturns,” he continued.

“With that being said, based on our funded status results as of June 30, 2020, the Board of Trustees will review the plan and determine the necessary actions to maintain our ability to remain fully funded and sustainable into the future. Additionally, any recommendations for change will reflect the long-term view of SDRS and the outlook for recovery in the mark.,” he said.

The SDRS offices in Pierre are closed this week, as are many throughout state government across South Dakota because of COVID-19, but emails and telephone calls are being answered.

Copyright 2020 Nexstar Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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