Despite Fluctuations, TN Public Pension System Remains Ahead Of Projections

Image Credit: Jernej Furman / CC

The Center Square [By Jon Styf] –

Tennessee’s public employee pension plan had returns that were remotely consistent with expectations, at least until the past two years.

But the plan’s accounting process, which limits the impact of year-to-year realized gains and losses, have come into play over the past two years.

That’s because, in 2021, the plan had a 25.6% return and — through the first half of 2022 — the plan lost 3.6% of its value. Any gain or loss of more than 10% in one year is phased into the plan over a 10-year period. The plan currently has $60.5 billion in assets.

“We take any asset volatility and we take it and spread them over 10 years,” said Actuary Justin Thacker. “… That 2022 loss hasn’t really hurt us at all because we are still phasing in the gains from 2021.”

The data was presented recently at the December meeting of the Tennessee Consolidated Retirement System’s board.

The accounting process of limiting the annual fund gains has left $1.11 billion in remaining unrecognized gains.

“The method’s working,” Thacker said.

Tennessee’s legacy pension plan is for state workers and teachers who began work before July 1, 2014. After that, retirement switched to a hybrid plan.

There are now 175,000 retirees receiving benefits from the plan and 162,000 in the plan who are actively working.

According to the fund’s accounting methods, the plan had $1.5 billion in unfunded accrued liability in 2021 (96.6% funded) and lowered that total to $830 million in 2022 (98.2% funded).The largest portion of that unfunded liability is for the consolidated state workforce, with $1.5 billion in unfunded liabilities.

The plan currently has 113,812 teachers with that number expected to drop to 73,000 in 2042 and be zero by 2102.

There are 111,035 state participants, a number expected to drop to 57,000 by 2042, be 15,600 in 2062 and have just 1,000 participants by 2082.

The teachers, as opposed to state workers, tend to work more years and later into life and thus reach higher salaries. The average active teacher in the plan made $65,570 in 2022, a jump from $62,259 the year before. The average state worker in the plan made $65,002 in 2022, a jump from $60,245.

The retired state worker average compensation, meanwhile, is $59,599 compared to $54,730 for teachers.

About the Author: Jon Styf, The Center Square Staff Reporter – Jon Styf is an award-winning editor and reporter who has worked in Illinois, Texas, Wisconsin, Florida and Michigan in local newsrooms over the past 20 years, working for Shaw Media, Hearst and several other companies. Follow Jon on Twitter @JonStyf.