State retirement system faces a deficit again

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PIERRE — The South Dakota Retirement System is under water again financially.

The market values of the public-pension plan’s investments are down about 5 percent from where they stood July 1, state investment officer Matt Clark reported Thursday.

That puts the system back into a deficit situation again, according to Doug Fiddler, the system’s senior actuary consultant.

Fiddler told the SDRS board of trustees that if the investments finished down 5 percent for the fiscal year ending June 30, 2012, there would be a negative gap of $469 million between the investments’ total value and the benefits currently promised for the next 30 years.

Fiddler said the market-funded ratio of assets to benefits would be 91 percent at that point. That would affect the size of the cost-of-living adjustment for SDRS beneficiaries in the next year.

State law sets a scale of 2.1 percent minimum for the COLA, and up to 3.1 percent, depending upon the market-funded ratio. The 3.1 percent increase is possible only if the market-funded ratio is 100 percent or better.

The system had finished the past fiscal year at a market ratio of 103 percent, enabling the trustees to grant the full 3.1 percent COLA.

The trustees have set a target of 7.75 percent average annual gain in order for the system to be financially balanced.

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