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SD retirement, unemployment trust funds regain financial strengths

PIERRE -- Their latest reports show South Dakota's trust funds for government retirees and jobless workers have regained their footing financially.

Both the South Dakota Retirement System and the state unemployment insurance program hit rough spots during and after the 2008-2009 recession. But, both are in positive conditions again.

The SDRS investments are poised to finish the 2014 fiscal year on June 30 in a more than fully funded position that is stronger than one year ago.

The unemployment insurance fund meanwhile hit its target for the first quarter of calendar 2014 and appears on track to finish 2015 with a desired balance of $78 million, even after employer contributions are reduced.

SDRS relies on mandatory employer and employee contributions and investment growth to make its pension payments.

The UI fund runs on mandatory employer contributions.

Out of necessity, businesses were socked with higher contribution rates and surcharges, as the UI program went broke during the depth of recession.

A federal loan was required to keep benefits flowing to workers who had lost jobs through no fault of their own.

The loan was repaid, the surcharges were repealed and the Legislature during the 2014 session adjusted the UI rates downward for 2015.

The proof is in the financial condition of the fund, which had a balance of $58.7 million after the first quarter this year. It is expected to finish 2014 with a balance of $75.9 million.

"So it looks like very good decisions were made and we're on track for the goals that were set," state Labor Secretary Marcia Hultman told members of the state unemployment insurance advisory committee at a meeting earlier this month.

The investment books won't close for fiscal 2014 for SDRS until later this month. But if state investment officer Matt Clark and his staff in Sioux Falls can finish with a 12.5 percent gain from the 2013 market value, SDRS will have a funded ratio -- market value vs. expected liabilities -- of 109 percent and a cushion of $799 million.

A variety of corrective actions were taken in recent years by the Legislature and by the retirement system's board of trustees to bring SDRS back into financial balance, along with the top-tier financial performances by the investment office.

The system's trustees received a presentation at their June 5 meeting about making adjustments to account for increasing life expectancies.

Trustees will continue their discussions in the months ahead. Any significant changes such as contributions rates and retirement ages would require the Legislature's approval.