A new report issued Thursday by Government House shows that as available funds held by the Government Employees Retirement System continue to dry up, the system is forecast to go broke in little more than a decade.
The market value of GERS assets has fallen by $21.8 million over the last two years and unfunded liability – the amount of additional funds the system would need today to meet is future obligations to retirees – increased by $124 million, from $1.72 billion to $1.84 billion, according to the report.
The information came from a report submitted by GERS to the Office of the Governor, giving its Actuarial Valuation and Review as of Oct. 1, 2013. This report, which was prepared by the system actuary, Segal Consulting, provides an update on the status of the financial condition of the GERS, and specifically its projected ability to meet its financial obligations to system retirees and current government employees.
The increase in the unfunded system obligations means that the funded ratio — the amount of funding in hand compared to the amount needed — has continued to decline from 45.7 percent to 40.2 percent. Segal Consulting now projects that the system will be insolvent, or unable to make its required payments to retirees, in 2025. Previous projections suggested that the GERS would be insolvent by 2023.
Gov. John deJongh Jr. said the report emphasized the need for action to shore up the retirement system.
“This recent report by Segal, given the higher unfunded liability number, reminds us all of the critical work yet to be done to implement reforms to the Government Employees Retirement System," the governor said in a statement.
"These reforms are urgently needed, and I continue to underscore the urgency, if our retirees and employees are to be protected from the catastrophe that will surely happen if we do not act. Our Pension Task Force has done its work, and provided tough, but necessary recommendations to address this situation. Those recommendations have been presented to the Senate in the form of legislation. It is now critically important that the Legislature take the next step and act.”
The bill submitted in March focuses on four steps to shore up the system and preserve its life. Those steps are:
asking employers and employees to contribute a larger amount toward pension benefits;
reducing benefits already being received and increasing the age and years of service needed before retiring;
limiting the annual cost of living increase, and;
changing the formula used to calculate benefits.
