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MOSERS leaders defend funding plan as board shifts asset mix and certifies 32% employer rate
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Summary
MOSERS officials told the Joint Committee on Public Employee Retirement that recent board changes—lowering return assumptions, adopting a minimum employer contribution policy and increasing public equity exposure—aim to strengthen long‑term funding even as the funded ratio remains about 55.4% based on the 06/30/2025 valuation.
Abby Spealer, executive director of the Missouri State Employees Retirement System, told lawmakers the system’s most recent valuation showed a funded ratio of 55.4% and that the fund recorded a 9.8% investment return for fiscal 2025. Spealer said MOSERS’ actuarial liability was about $17.4 billion and the market value of assets was roughly $9.6 billion.
Spealer said the board certified a 32% employer contribution for fiscal 2027 under a minimum employer contribution policy adopted in September 2023. “Per this policy … the FY27 minimum rate was 32%,” she said, noting the actuarial‑determined rate shown in the valuation was 27.44% but the board set the higher minimum to accelerate unfunded liability (UAL) paydown.
The policy, she said, and other recent changes—lowering the investment return assumption to 6.95%, updating mortality to generational tables and shortening certain amortization practices—are intended to strengthen the plan’s long‑term position even though they increased measured costs and reduced the reported funded ratio in the near term. Spealer said the fund uses a five‑year asset‑smoothing method, which spreads recognition of gains and losses and limits year‑to‑year funded‑ratio movement.
Tim McHenry, MOSERS’ external investment consultant, told the committee that asset allocation is the largest determinant of a pension fund’s long‑term returns. He said MOSERS historically ran a less equity‑heavy, more diversifying structure than many peers, which helped reduce equity sensitivity but produced lower returns during a long equity bull market. “Over the five years as of 06/30/2024, the MOSERS policy index return was 4.4% and the median peer return was 7.1%,” McHenry said.
McHenry and Spealer both described changes adopted after the 2024 asset‑liability study that incrementally increased public equity exposure and phased the shifts in over eight quarters. McHenry said recent short‑term performance has improved—ranking the portfolio in the top quartile relative to peers on trailing one‑year measures—but cautioned that longer‑term comparisons will take time to reflect the allocation changes.
Committee members pressed for specifics about how demographic trends and payroll growth affect funding. Spealer noted MOSERS is a mature plan with roughly 44,673 active employees, about 56,500 retirees/beneficiaries and roughly 57,000 inactive members, of which about 39,000 are term nonvested. She said slower payroll growth increases pressure on contribution rates because MOSERS amortizes UAL on a level‑percent‑of‑pay schedule and reduced payroll means less base to spread UAL payments.
On projections, Spealer said the board’s minimum employer contribution policy would—if future assumptions are met—reach 80% funded about four years earlier than under the actuarial‑determined path (2037 vs. 2041 in the presentation), but that funded‑ratio improvements will be gradual and dependent on many assumptions.
The hearing closed with committee members asking for follow‑up material and clarification of past decisions; the chair adjourned the committee when questions concluded.
