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Study: PSPRS asset growth rate again tops large U.S. pension funds

AAA

Public Safety Personnel Retirement System
State of Arizona
Contact: Christian Palmer
Phone: 602-296-3736

 

Study: PSPRS asset growth rate again tops large U.S. pension funds

Admin. Townsend: ‘Team effort’ with employers slashes billions of pension debts, adds to trust

ARIZONA – One year after leading all large U.S. pension plans in rate of growth, the combined growth rate for the PSPRS pension trust and defined contribution plan has again outpaced its peer plans nationally, according to the latest Pensions & Investments 1,000 Largest Retirement Plans annual report.

The analysis by P&I – the industry bible for public and private pension plans – shows that PSPRS’s combined assets under management grew at a rate of more than 13 percent to reach $18.3 billion for the one-year period ending Sept. 30, 2022. PSPRS was one of only six of the survey’s largest 200 retirement plans to increase its assets and the only large retirement plan to increase assets under management by greater than 3 percent.

While PSPRS assets under management increased, the vast majority of pension and defined contribution retirement plans asset values declined due to sharp decreases in major stock and bond indices. PSPRS assets grew in response to the efforts of public safety and corrections employers, who contributed a combined $2.85 billion during the 2022 fiscal year, including state appropriations of more than $1 billion, to reduce unfunded pension liabilities.

Many additional employer contributions were financed through pension obligation debt instruments with interest rates far lower than the rate applied to unfunded pension liabilities.

“The growth of PSPRS assets continues to be a team effort with our employer agencies, their leadership and policymakers taking the strategic initiative to save Arizona taxpayers money and to protect the retirement benefits promised to our state’s first responders, corrections officers and elected officials,” said PSPRS Administrator Mike Townsend. “The commitment of employers to reducing unfunded liabilities coupled with the innovative work of our investment team has made a huge difference for the system, for our state and for our members.”

In fiscal year 2022, 76 public safety and corrections employers made additional pension debt contributions of $1 million or more. State, county, municipal and fire district employers have made cumulative additional contributions of $4.86 billion over the last three years to reduce pension debts.

The 2023 1,000 Largest Retirement Plans report ranks PSPRS as the nation’s 134th largest U.S. retirement plan, up from its previous position of 175 last year when assets grew by 44 percent to reach $16.1 billion.

“It’s excellent news to see the efforts and commitment of Arizona’s public safety and corrections employers, our state’s policymakers and the PSPRS team acknowledged – and especially to see our system continue to grow,” said PSPRS Board of Trustees Chairman Scott McCarty. “Leading all large U.S. pension plans in rate of growth for two consecutive years is more than a headline. It’s retirement security and taxpayer savings from substantial state appropriations and employers astutely using a low interest rate environment to everyone’s advantage.”

Stakeholders from across the state and national pension experts applauded the system’s performance and the ongoing commitment of employer agencies to securing the system for the future.

  • Tom Belshe; executive director of the League of Arizona Cities and Towns: “Cities and towns throughout Arizona reduced their unfunded public safety debts by more than $1.1 billion last fiscal year alone. We look forward to our continued work with the PSPRS Board of Trustees and staff to eliminate pension debt and improve plan sustainability. The results of the Pensions & Investments survey is a great accomplishment and reminder that we are making progress for the benefit of first responders and taxpayers.”
  • Keith Brainard, research director of the National Association of State Retirement Administrators: “Our organization studies to what degree governments are meeting their actuarially required contributions. In the case of PSPRS, employers are exceeding their actuarial requirements to pay down billions of dollars of unfunded pension liabilities. Paying down these unfunded liabilities helps reduce future costs while promoting both the financial condition of these plans and the retirement security of Arizona’s public safety personnel. The Pensions & Investments survey results confirm that what is happening in Arizona will strengthen those plans for all stakeholders: employers, plan participants, and taxpayers.”
  • Joe Clure, executive director of the Arizona Police Association: “At a time when the financial markets have been turbulent, PSPRS continues to perform well and, with astute decision-making by employers, to grow its assets. That’s good news for every Arizonan and for every police officer.”
  • Dan Doonan, executive director of the National Institute on Retirement Security: “With rapid growth of PSPRS – as reported by Pensions & Investments – the system’s current and future retirees will continue to support thousands of businesses and jobs across the state at a lower cost to taxpayers. This happens because as PSPRS reduces its unfunded liabilities, more of the benefit dollars will come from the pension’s investment returns, which takes the pressure off Arizona taxpayers.”
  • Don Jongewaard, president of the Professional Fire Fighters of Arizona: “Our membership stands united in gratitude for the performance of PSPRS and the determination shown by our employer agencies. Every dollar of unfunded liability that gets paid down today helps improve the future of our state. It helps taxpayers, takes the pressure off local budgets and further secures the retirement of first responders. That’s a win for one and all.”
  • Hank Kim, executive director and counsel of the National Conference on Public Employee Retirement Systems: “The national recognition earned from Pensions & Investments is well-deserved. In a practical sense, for stakeholders what this means is a secure retirement for PSPRS members at the lowest cost to Arizona taxpayers. The leadership and turnaround of the PSPRS plan is public administration at its finest.”
  • Paul Sheldon, president of the Arizona Fraternal Order of Police: “Every day, our officers and our families make tough decisions when it comes to public service and when it comes to handling our finances. The performance of PSPRS and our employer cities and towns is reflective of that same responsible mindset. Working together to slash debt is a sure-fire way to free up resources for public safety and other important priorities. It’s no different than paying off your credit card debt as fast as you can. It’s the smart thing to do, and we applaud it.”

The PSPRS trust combined with the Corrections Officers Retirement Plan (CORP) and the Elected Officials Retirement Plan (EORP) provides retirement, disability and survivor benefits to about 60,000 retired and active members.

PSPRS is governed by a nine-member board consisting of four members of PSPRS-managed retirement plans and five civilians who meet stringent requirements for financial, investment and business expertise.