The Missouri General Assembly's Joint Committee on Public Employee Retirement was given a stark quarterly report on retirement pension investments Wednesday.
"It's just not a pretty picture," Dean Dohrman, JCPER executive director, said about the top-performing plans of the last quarter. "Some obviously are doing better than others -- some have double-digit losses. I would say anything that kept it to a single-digit loss is probably a win in this scenario."
Dohrman cautioned the committee it would see "several negative numbers" before presenting the quarterly report, adding it's "the condition of the markets at the time."
Retirement systems are still reeling from the COVID-19 pandemic and its economic impact, he said. Conditions are expected to level out, but it will likely be a while, he continued.
In addition to the quarterly investment report, Dohrman presented the committee with an annual report describing retirement fund conditions in 2021 and offered a legislative update on the 13 bills that could potentially impact retirement systems this session. The committee also installed Rep. Barry Hovis, R-Whitewater, as its chairman and Sen. Mike Bernskoetter, R-Jefferson City, as its vice chairman.
Hovis, the committee chairman, noted changes in the stock market are frequent and it's been under pressure lately.
"There's a lot of strife overseas with war, there have been cutoffs of oil, all these things contribute to a market that is probably not vibrant," he said. "I don't want people to be too concerned because there are all these ebbs and flows so hopefully we continue to watch that."
The quarterly report indicates a different picture than the 2021 annual report, Dohrman said.
Dohrman said 2021 was a good year for retirement plans as assets increased by more than $17 billion. Plan liabilities -- the number of people drawing on retirement benefits -- also increased by 12,931 people.
Given state demographics, Dohrman said he expects the number of people receiving retirement benefits to continue growing.
"So that liability number keeps moving up on us, which of course keeps downward pressure on our funded ratios," he said.
Of the 145 public employee retirement systems in Missouri, Dohrman said 85 were funded between 70-100 percent in 2021, 50 were funded above 100 percent and 10 were on a watchlist, meaning they are funded below 70 percent. The year prior, 100 plans were funded between 70-100 percent, 28 were funded above 100 percent and 17 were funded below 70 percent, he said.
"We're in good shape, as far as looking back at this point," Dohrman told lawmakers on the committee. "Of course, that is going to change."
He said private investments have been a better source of revenue than the stock market since 2017, calling revenue in 2021 "explosive." The challenge moving forward, he said, is ensuring revenue at least keeps pace with the growing number of public employees drawing retirement benefits.
MOSERS, the retirement plan for state workers, has heavy liabilities and remained just below 70 percent funded. Dohrman said the $500 million investment lawmakers approved for MOSERS last session won't show up on reports until next year.
"The lump sum helps, but it doesn't solve all problems," he said. "That definitely, definitely will help."
Retirement plans for Columbia police and firefighters also remain among those that are underfunded. As investments grew in 2021, liabilities grew more significantly, Dohrman said. Funding for the plans stayed around 60 percent in 2021.
Approximately 13 bills related to public employee retirement systems have been filed this session, Dohrman said, many of which are aimed at reforming funding mechanisms and altering governing bodies.
Legislators have also filed several bills related to Environmental, Social and Governance (ESG) investing this session. ESG generally refers to a philosophy that investors should be concerned with not only profits but how their investments affect the environment and society.
Dohrman said most if not all of the public employee retirement systems in Missouri have adopted a policy to maintain traditional fiduciary responsibilities to members. If ESG investing fits into that responsibility, it's permitted.
CORRECTION: This article was edited at 10:38 a.m. March 2, 2023, to correct Dean Dohrman's job title and to clarify other references to the retirement systems.