Actuarial consultants: pension unfunded liabilities fell in FY25; full funding possible in 2033–2039, commission urged to pre‑set glide path

Actuarial consultants from GRS told the Retirement System Investment Commission on March 5 that strong FY25 investment returns and higher payrolls combined with employer and member contributions reduced the plans’ unfunded liabilities and improved funded ratios.

GRS consultant Danny White and colleague Joe Newton said FY25 asset performance materially exceeded assumptions and, together with higher payroll, produced a one‑time tailwind that lowered the unfunded liability. "Assets the asset return for FY25 — you can see it was almost $1.6 billion more than expected," White said, adding that the experience was mirrored, in smaller magnitude, for PORS.

Why it matters: A smaller unfunded liability reduces future pressure on employer and employee contributions if favorable experience continues. But GRS cautioned that funding outcomes are probabilistic and depend on future returns, payroll trends and any statutory or benefit changes.

GRS presented stochastic projections showing a central range for reaching full funding between roughly 2033 and 2039 depending on long‑run return assumptions (9% assumptions shorten the timeline; 6% assumptions lengthen it). Newton noted the statutory role of an 85% funded ratio: "Because in the statute that's the first time the contribution rates could change," he said, urging the commission to adopt a pre‑agreed policy for how contribution rates would be adjusted to avoid ad hoc or destabilizing reductions.

During questions, Commissioner Mike asked for historical context on amortization and discount‑rate changes; GRS reminded the board that reductions in the assumed discount rate since 2017 materially increased reported liabilities and that payroll‑driven contribution growth has a countervailing long‑term benefit. Newton explained the basic actuarial concept: "The unfunded liability represents the difference — how short are you right now between what's owed to the members and everything you've got in the bank right now."

What the consultants reported (selected details): - GRS attributed about $1.6 billion of positive FY25 surprise to asset returns for SCRS and roughly $300 million for PORS. - GRS reported year‑over‑year declines in unfunded liability, with a cited reduction of about $1.468 billion for SCRS and about $224 million for PORS. - Across systems, GRS noted an actuarial accrued liability on the order of $27 billion (aggregate actuarial value referenced in discussion).

What the commission discussed: commissioners pushed staff and consultants on presentation and labeling of probabilistic results (50th‑percentile base case versus actuary’s separate probability statements). GRS recommended forming a policy or working group now — before a funded threshold is reached — to set mechanics for any future contribution rate decreases (for example, whether to pace reductions gradually or allow steeper one‑time drops), and whether to target a post‑funding cushion above 100%.

Next steps: GRS and staff said they would continue to work with the commission and PEBA staff on policy options; staff noted they will return AIP/SIOP revisions to the commission in April and must adopt final changes by the statutory May 1 deadline.