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PERA reports improved returns but warns demographic pressures; lawmakers consider one-time 2% payment
Summary
PERA reported FY25 assets of about $18.5 billion and a funded ratio around 65.2% after reforms; the director said contribution increases and asset changes have improved solvency projections but demographic trends mean the next decade will be delicate. Lawmakers discussed a proposed one-time 2% noncompounding payment to retirees (approx. $70 million appropriation).
Greg Rehil, executive director of the Public Employees Retirement Association (PERA), updated the HAFC subcommittee D on fund performance and long-term solvency. PERA closed FY25 at about $18.5 billion with an investment return of roughly 9.69% and reported a funded ratio of 65.2% and an unfunded liability near $9.7 billion.
Rehil said reforms enacted in Senate Bill 72 (2020) — including recurring contribution increases and COLA adjustments — have materially improved PERA’s cash flow and funding trajectory. He reiterated that the fund’s long-term funding period currently projects at about 50 years under actuarial assumptions but that long-term projections that incorporate tier changes suggest improved timelines (some internal projections nearer to 41 years). Rehil warned of demographic headwinds: retirees are living longer and the active workforce is not expected to grow substantially, producing a period of tighter cash flow over the next decade.
PERA previewed potential legislation to provide short-term relief to retirees: a proposed appropriation (described in testimony as roughly $70 million) to fund a one-time, noncompounding 2% payment to retirees for up to two years. Rehil noted the current average annual retiree benefit is about $34,000, so a 2% one-time payment would be on the order of several hundred dollars for a typical retiree. The association also described continuing administrative clean-up legislation (housekeeping to the PERA Act) to clarify statutory provisions.
Committee members questioned how PERA will manage the approaching demographic shifts, whether additional contribution increases are necessary, and how the recently implemented reforms and investment strategies will affect funded status over the next 10–25 years. Rehil said the fund remains on a path to solvency if current policies and contributions remain in place, but that the decade ahead will require prudent management.
