Pension Systems Selling Assets to Cover Benefits

by Kristina Rasmussen From Crain’s: Illinois Teachers’ Retirement System, Springfield, plans to sell $3 billion in investments, or about 10% of its $33.1 billion in assets, in the current fiscal year to pay pension benefits, according to Dave Urbanek, public information officer. The system is the fifth Illinois statewide defined benefit plan to sell off investments this...

by Kristina Rasmussen

From Crain’s:

Illinois Teachers’ Retirement System, Springfield, plans to sell $3 billion in investments, or about 10% of its $33.1 billion in assets, in the current fiscal year to pay pension benefits, according to Dave Urbanek, public information officer.

The system is the fifth Illinois statewide defined benefit plan to sell off investments this fiscal year to pay benefits.

Illinois State Universities Retirement System, Champaign, expects to sell $1.2 billion in investments from its $12.2 billion defined benefit fund this fiscal year to raise liquidity to pay benefits to participants.

The Illinois State Board of Investment, Chicago, could sell $840 million investments from its $9.9 billion fund to pay benefits of the Illinois State Employees’ Retirement System, Illinois Judges’ Retirement System and Illinois General Assembly Retirement System. ISBI oversees the investments of the three systems.

An analysis from March 2010 put the Teachers’ Retirement System funding level (assets at market value without asset smoothing) at a measly 39.1 percent, with $44 billion in unfunded liability. The other plans are not in good shape either.

Remember, there is no plan in place for the state to make its annual contributions to the pension systems this year.

Selling your seed corn for next spring to eat today is a sign of desperation. Defined-benefit pension plans–and their funding mechanisms–must be reformed. See our Pension Funding & Fairness Actproposal for a good way forward.