As we get to the close of another year, it’s always best to reflect on the good and the bad that we experienced throughout the year. This allows us to learn from mistakes and build off our successes.
Globally, 2021 was a challenging year. COVID still had a hold on society and the economy. The PFRS board, in only its third year of existence, needed to show that regardless of any hurdles, we would continue to move forward.
The system did see some positive growth. For instance, according to the latest information regarding funding, the rate of return projected by the state treasurer is 7.3 percent, and the funding level for the overall system is 68 percent. This means that the PFRS is the healthiest of the state plans. The plan’s returns were 28.63 percent, which considerably outpaced the required 7.3 percent to fund the pension. Just to put this in context, having a higher rate of return places less stress on the plan’s assets. The plan must synchronize its contributions and its investment returns in order to fund the plan’s benefit payments and its operating expenses.
On the administrative side, the staff have entered into the drafting of an MOU (memo of understanding) with the state treasurer to lay out the functioning for the plan’s assets when separated from the comingled retirement systems. This is an important milestone, because the MOU, together with the asset allocation for the plan, will create a separate and distinct retirement system that will inure for the sole benefit of PFRS members. I do have to say that this could not be accomplished without the amazing team of Board Attorney Rob Garrison, Board Secretary Lisa Pointer, Executive Director Greg Petzold and their dedicated staff.
As 2022 approaches, the world will enter into another year of the unknown. Will the pandemic finally end? Have we really felt the economic pressures of the pandemic’s aftermath yet? Can instability in foreign counties affect markets globally?
While it’s tough to predict what lies in front of us, we can be sure that plans and contingency plans are being reviewed to protect our system. Remember, we didn’t hire “just some investment guy.” We researched and assembled a team who are at the top of their game and as loyal as your partner in the field. We know it’s always great when you’re making large returns in a healthy market. However, it’s just as important to maintain and retain assets in a struggling market. Recon, intelligence and strategy development are how you survive and grow when others may fail.
As for the ongoing question of “When will we get COLA back?” all I can say is read what I wrote above. PFRS is like a business, and with any business, you have a plan. These plans have benchmarks and milestones that need to be reached. To ensure the return of COLA in the future, we must remain disciplined today. Retired Members Trustee Bruce Polkowitz has been a strong advocate and will remain vigilant on this issue. Trust me, the word “retirement” is the largest word in the title of our system and reminds us of our obligation to the entire membership, both active and retired.
But just as we sat down for that first meeting in February a few years ago, we made a commitment to the hard work of NJSPBA President Pat Colligan and FMBA President Ed Donnelly, who made this opportunity a reality for us to manage our own system. So when COLA is restored, it will be with the sound financial stability of the system so that it will be there and not taken away again.
So to be clear, it’s not on the back burner and will be addressed when institutional history, sound forecasting and financial stability are achieved. While we can’t give a date, I will say that if enacted prematurely, it could injure the system. I know it’s hard to hear, but all we ask is for everyone to be patient. We have been pretty successful since we took over managing this system, but it’s only because we stepped with sound footing. Every advancement we make brings us that much closer to our goal.
Just as with any profession, politics plays a role in how government operates. The PFRS is not immune to this. Our board has played an active role in monitoring legislation that can affect us either directly or indirectly. Currently, there are several pieces of legislation hanging around in the state legislature’s “lame duck session.” This is the small time frame before the end of the legislative session. If any of these bills move toward any committees, we will have an active presence and will address any concerns.
Have a wonderful holiday season and a happy new year.