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Archive for Friday, October 3, 2008

KPERS assets drop more than $1 billion in fiscal year’s first quarter

October 3, 2008

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Troubled by 401 (k) losses? Imagine what Glenn Deck feels like.

Deck is the executive director of the Kansas Public Employees Retirement System, which is the pension plan for state workers, teachers and many local governmental employees.

For the first quarter of the fiscal year that ended Sept. 30, the assets of KPERS dropped more than $1 billion, bringing the fund to about $12 billion.

"It has been a pretty significant downturn," he said.

Deck said the performance of KPERS has mirrored pension plans across the nation.

The dropoff is not unlike stock problems after the terrorist attack on Sept. 11, 2001, or the market crash in 1987, he said.

Long term, he said, he expects the market to recover. In the previous fiscal year, assets were down $640 million, but in the three years before that, KPERS' investment income grew by $2.2 billion, $1.4 billion and $1.2 billion, he said.

He said retirement benefits are safe, but added that if the market doesn't recover in the next year or so, employer contributions to KPERS may have to be increased.

Comments

newsreader 6 years, 2 months ago

Wasn't there just an artciel published about how KPERS won't lose any money because of the downturn? I'm confused...

mmiller 6 years, 2 months ago

I'm 27 and have been with the state 2 years. I best have my KPERS when I retire! :O)

Beth Bird 6 years, 2 months ago

I am scared by this. I am an educator. I do not have a choice if I contribute to KPERS or not. Four percent of my income is deducted and automatically placed in this account. One of my fears is that this will turn into something like Social Security and by the time I get ready to retire (in 40 years), there will be no money left. I will have paid in my share and will get nothing in return.

KU_cynic 6 years, 2 months ago

"He said retirement benefits are safe . . . "This is pure misdirection. KPERS faces a multibillion dollar funding shortfall -- the difference between the actuarial present value of promised future benefits and the current market value of the investments, and the recent market downturn just dropped the latter by $1 billion, further widening the funding gap.The state of Kansas is scamming current workers -- to whom it promises these future benefits -- or future taxpayers who will be left holding the bill for the unfunded liabilities.This is the greatest scandal in state government, and no one is willing to fess up to it!

BigDog 6 years, 2 months ago

This should be a bit disturbing for those in the KPERS system.Part of where this large shortfall (prior to this market loss) was created was when the state created the points system which based ability to retire upon years of service and age ....some people came retire at age 50-55. Age and years of services just need to add up to 85 points. The problem is the system wasn't built to handle people retiring that young and for paying retirement benefits to retirees for 25-30 years.

jmadison 6 years, 2 months ago

The press has failed to report on the vast underfunding of municipal and state pension funds, not subject to the accounting rules that private business must follow. Just like Social Security, the coming tsunami of shortfalls in the system will be costing taxpayers much for the next 20+ years. Our financial system has been built on sand which is starting to wash away.

domino 6 years, 2 months ago

BigDog - then figure in the retirees who choose to go with the Joint Anunity plan - they can have their monthly payments reduced and, when they die, their Joint Anunitant receives the same amount that they were receiving for the rest of their life!! I know a couple that did this - he is about 10 years older than his wife and has some health issues - it only reduced his monthly benefits by about $50 but will pay his wife that same amount (assuming it is still solvent!) for the rest of her life if /when something happens to him.

Godot 6 years, 2 months ago

If I were in KPERS and eligible to retire, this is the option I would take."Partial Lump-Sum Option (PLSO)You can take part of your retirement benefit in an up-front lump sum at the start of your retirement. This lumpsum is then combined with one of the other retirement options to provide reduced, regular monthly payments forthe rest of your life.The PLSO is available in 10, 20, 30, 40 or 50 percent amounts of the actuarial present value of your lifetimebenefit. The percentage you select determines the size of the lump sum and the decrease in your monthly benefit.For example, a 40 percent PLSO option would result in a single lump-sum payment equal to 40 percent of theactuarial present value of your benefit, along with a permanent 40 percent reduction in your monthly payments."http://www.kpers.org/preretirementseminar_kpers.pdfCheck out the table for calculating your immediate lump sum and subsequent monthly payments. This is an incredible deal.

Jingal 6 years, 2 months ago

3toedsloth: Agreed; and if the headlines are this confusing, imagine the average quality of the information in the body of the story. This is one of those complicated concepts that doesn't lend itself to two column inches and a well intentioned but under informed staff writer. Unless- (to paraphrase) Suppose you're a media outlet - and suppose you're more interested in sensationalism than information. But I repeat myself...

Richard Heckler 6 years, 2 months ago

Don't play Wall Street unless one can afford to lose money.Think where Social Security would be today if congress would have allowed McCain and Bush to invest in Wall Street?Has the president actually lied to the public about Social Security?Yes. President Bush has repeatedly said that those who put their money in private accounts are "guaranteed" a better return than they'll receive from the current Social Security system. But every sale of stock on the stock market includes the disclaimer: "the return on this investment is not guaranteed and may be negative"--for good reason. During the 20th century, there were several periods lasting more than 10 years where the return on stocks was negative. After the Dow Jones stock index went down by over 75% between 1929 and 1933, the Dow did not return to its 1929 level until 1953. In claiming that the rate of return on a stock investment is guaranteed to be greater than the return on any other asset, Bush is lying. If an investment-firm broker made this claim to his clients, he would be arrested and charged with stock fraud. Michael Milken went to jail for several years for making just this type of promise about financial investments.President Bush also misrepresents the truth when he claims that Social Security trustees say the system will be "bankrupt" in 2042. Bankruptcy is defined as "the inability to pay ones debts" or, when applied to a business, "shutting down as a result of insolvency." Nothing the trustees have said or published indicates that Social Security will fold as a result of insolvency.http://www.dollarsandsense.org/archives/2005/0505orr.html

threetoedsloth 6 years, 2 months ago

The state is on the hook for the promised benefits. If KPERS investments don't meet the need, general tax receipts will be spent. The state has taken action over the past 5 years to try and shrink the gap between expected payouts and income from its investments.The system will change for individuals hired after 7/1/2009. Higher retirement ages and contribution amounts, with the tradeoff of vesting more quickly and (I think) a small COLA during retirement. Required contributions from employers (state, local governments, schools) have been progressively increasing in an attempt to narrow the gap, as well.FWIW, I thought this morning's article was ridiculously titled, and didn't explain well at all how KPERS participants are "protected."

notajayhawk 6 years, 2 months ago

All of you that screamed in objection to the bailout ought to consider this. If KPERS (and MOSERS and CALPERS, etc.) took that kind of a bath, what do you think happened to private (read: "tax paying") investors?Obama can raise the capital gains tax rate to 95% if he wants - 95% of nothing is still nothing. And the huge losses from this year can be carried forward indefinitely to offset profits when the market recovers. Bailout or not, people better get used to the idea that all the wonderful socialist promises Obama made aren't going to happen, since there's not going to be any way to pay for them.

napoleon969 6 years, 2 months ago

To quote Senator Everett Dirksen (a well known old codger who occupied a senate seat back in the 60's): "A billion here, a billion there and pretty soon you're talking about real money!"

Thinking_Out_Loud 6 years, 2 months ago

I don't know that State employees are doing so bad. Apparently, there's a new pay plan for them. http://da.ks.gov/newpayplans/default.htm Then there are the special discounts they get as State workers. https://da.ks.gov/ps/subject/star/db_star/dbList.asp?ID=City&ID2=Desc

Charles L Bloss Jr 6 years, 2 months ago

I am retired under K, P & F, a division of KPERS. The main problem is that there is no yearly COLA. This year I got $300, but I have not had one for 6 or 7 years. The wimpy legislature needs to pass a law that gives retirees a yearly COLA like social security does. Then when I get the COLA from social security, the medicare premium goes up. So I either gain nothing, or I slide further backwards. This old age isn't for sissies. Thank you, Lynn

Godot 6 years, 2 months ago

jkilgore, and 8 per cent loss in one quarter is something to worry about. That oss is net of the employee and state contributions. I'd like to know the amount of contributions received during that quarter, then calculate the actual loss.

Jeff Kilgore 6 years, 2 months ago

I'm a teacher. But I'm not worried about it. Yeah, an eight percent loss isn't fun, but that's what it is. Probably what is needed is a 1 or 2 percent increase for all state contributers and within the next year. It's not gone, nor will it be. No, I don't trust much, but this fund is fairly safe. As safe as most state funds.I interviewed a few years ago with an Arkansas school district. Their retirement deduction is 14%-- I was stunned.

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