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Public worker pension plans may face lower investment return

June 7, 2019

ALBUQUERQUE, New Mexico (AP) — New Mexico’s pension system for public employees is not expected to hit its target for investment returns this year, officials said.

Wayne Propst, executive director of the Public Employees Retirement Association, told lawmakers Wednesday that missing the target could have a serious effect, the Albuquerque Journal reported Thursday.

Investment returns this year for the $15 billion pension fund serving state and local government retirees, including police officers, firefighters and judges, may come in at 3% to 5%, instead of the standard 7.25% target used by many plans in the nation, Propst said.

If the state program has a 5% return this year, the projected ratio of how well the plan is funded in 2043 would drop from 74% to 69%.

“This has been a very volatile year in the markets for public pension plans across the country,” Propst said.

The plan has generated an average 10% annual investment gain over the past decade, Propst said.

The state’s Educational Retirement Board said it is too early to predict whether its pension fund for teachers will reach the 7.25% target this year.

Officials at both pension plans stressed that 7.25% is a long-term goal.

Financial experts warned New Mexico officials last month to prepare for the possibility of poor investment returns or other conditions that could further damage the health of the pension systems, the newspaper reported.

“We can’t invest our way out of this,” Democratic state Sen. George Muñoz said Wednesday after Propst’s presentation.

A task force established by Democratic Gov. Michelle Lujan Grisham is preparing recommendations to improve the retirement association’s financial health. The task force has private meetings scheduled in June and July and will meet again publicly Aug. 8.

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Information from: Albuquerque Journal, http://www.abqjournal.com

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