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PERS actuarial update shows funded ratio improvement; Highway Patrol still needs additional support
Summary
PERS reported improved funded ratios after recent investment gains and assumption changes, but the Highway Patrol retirement plan remains short of a self-sustaining trajectory and PERS will propose additional funding options.
Derek Holbein, chief operating and financial officer of the Public Employees Retirement System, told the legislative committee the system’s latest valuation improved key metrics but left some plans still in need of targeted assistance. Holbein said the main plan’s unfunded liability fell from $1,880,000,000 to $1,730,000,000 and the funded ratio rose from 67.7% to 71.3% following an experience study and strong investment returns.
Why it matters: The valuation determines the ADEC (actuarially determined employer contribution) that affects state budget planning and political subdivisions. Holbein said the valuation also transitioned to a closed amortization period, meaning most plans (except the main plan and Highway Patrol) will be on a 20‑year funding path.
Holbein summarized how updated assumptions and smoothing of investment gains were applied. He said market returns were strong — “11.84%” on market value — but the actuary recognizes gains over five years; for this biennium PERS recognized about 2.37% of the current year’s returns in the actuarial calculation. He said the recent experience study (2019–2024) reduced ADEC pressure for most plans but slightly increased ADEC for Highway Patrol.
On the Highway Patrol plan, Holbein said recent cash infusions ($3 million in FY24 and $15 million received in July) helped but did not put the plan on a clear path to full funding; factoring the $15 million would raise its funded percentage to about 78%. He said PERS will present three scenarios to its board and intends to submit legislation this session to seek additional funding for Highway Patrol.
Holbein also described the ‘spillover’ funding mechanism that begins next month: under the new defined contribution plan, participant elections that fall short of maximum contributions will redirect the differential to the main plan. That mechanism was not included in the July 1 valuation because there was no experience to model yet.
Members commended PERS’ work. Holbein cautioned that projections can change year to year and reiterated that if current assumptions and cash flows hold, the state’s expected oil and gas stream would cover the ADEC the actuary calculated in this valuation without a PERS request for new general funds.
The committee did not take a vote on PERS matters today; Holbein said a bill addressing Highway Patrol funding is anticipated.
