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TRS says it lost $4 billion since end of 2019, but assets are at $50.18 billion

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Illinois

Each year, Teachers’ Retirement System distributes approximately $7 billion in benefits to retired members and beneficiaries. Those benefits must be – and always have been – paid each month, no matter what the economic conditions may be.

TRS will continue to have sufficient funds to meet all benefit payments on time and in full for the foreseeable future despite the worldwide economic downturn created by the spread of the coronavirus.

The System’s defensive investment strategy enabled TRS to protect the bulk of member assets during recent market upheavals. On December 31, 2019, TRS assets stood at $54.24 billion. As of April 20, 2020, the investment portfolio was valued at $50.18 billion.

“The impact of the economy’s hard stop is being felt in every household, every business, every school and every government in the United States. TRS is not immune,” said TRS Executive Director Dick Ingram. “TRS was able to limit the economic damage from the coronavirus because our investment strategy emphasizes keeping risk at a minimum.”

A key element of the TRS investment program is to maintain a focus on steady, long-term investment returns. Short-term corrections in the investment markets get the headlines, but TRS recognizes that the majority of its members maintain relationships with the System that last for several decades.

For instance, the 40-year return for TRS at the end of 2019 was 9.1 percent. During the same period, the annualized return for the S&P 500 index was 8.4 percent.

In its 81-year history, TRS has survived numerous economy-shattering events, including World War II and the resulting reconstruction of Europe and Asia, wars in Korea and Vietnam, oil supply crises in 1973 and 1979; runaway inflation in the 1970s and 1980s; numerous stock market “corrections;” the Iranian invasion of Kuwait, the terrorist attacks of September 11, 2001 and five global health epidemics – SARS, Ebola, the Avian Flu, the Zika virus and the Swine Flu.

“Our long-term perspective and strategy serve our members well,” Ingram added.

To put this into some perspective, the Fiscal Year 2020 budget appropriated $4.8 billion to TRS. And $4 billion has vanished for now.

Also, Iraq invaded Kuwait, not Iran.

posted by Rich Miller
Wednesday, Apr 22, 20 @ 12:52 pm

Comments

Serious question - why do the “experts” tell people with 401(k) funds invested in the market to wait, the market will rebound. Yet for defined benefit plans, the “experts” turn into Chicken Little, and the only answer is “immediate cuts” ??

Comment by Anyone Remember Wednesday, Apr 22, 20 @ 1:00 pm
TRS was there when the Russians bombed Pearl Harbor.

Comment by SAP Wednesday, Apr 22, 20 @ 1:05 pm
==Serious question - why do the “experts” tell people with 401(k) funds invested in the market to wait, the market will rebound. Yet for defined benefit plans, the “experts” turn into Chicken Little, and the only answer is “immediate cuts” ??==

There is a big difference between a 401K “defined contribution” plan and a state backed “defined benefit” pension plan.

If a 401K loses money and the market does not bounce back, the individual gets less money.

If a pension fund loses money and the market does not bounce back, the individual is entitled to the same payouts irrespective of dollars in the pension fund.

Comment by Shelly Wednesday, Apr 22, 20 @ 1:14 pm
=== TRS was there when the Russians bombed Pearl Harbor.===

- SAP -… it was the Germans who bombed Pearl Harbor. Keep up, geez…

Comment by Oswego Willy Wednesday, Apr 22, 20 @ 1:16 pm
==Yet for defined benefit plans, the “experts” turn into Chicken Little, and the only answer is “immediate cuts”==

My 401k plan doesn’t have a large net liability.

Comment by City Zen Wednesday, Apr 22, 20 @ 1:17 pm
Time to consider bankruptcy.

Comment by Hippopotamus Wednesday, Apr 22, 20 @ 1:18 pm
=== Time to consider bankruptcy.===

Explain the process. If it’s “time”, then what are the steps?

Comment by Oswego Willy Wednesday, Apr 22, 20 @ 1:20 pm
===Also, Iraq invaded Kuwait, not Iran.===

Lol, Iraq also invaded Iran so you can understand the confusion.

Comment by 47th Ward Wednesday, Apr 22, 20 @ 1:21 pm
—
If a pension fund loses money and the market does not bounce back, the individual is entitled to the same payouts irrespective of dollars in the pension fund.
—

It’s what we were promised when we took a state job for lower pay.

Why should we expect anything else?

Oh wait. You want to say, yeah, well, the promise they extended doesn’t count now. Is that it?

Comment by Mr. K. Wednesday, Apr 22, 20 @ 1:47 pm
Step 3. Can be delayed to meet required time limits.

Comment by Hippopotamus Wednesday, Apr 22, 20 @ 1:48 pm
Well, here is another the glass is half full comment. If the fund was fully funded (I think they were 60% underfunded) they would have lost around $10 billion instead of $4

Comment by Been There Wednesday, Apr 22, 20 @ 1:49 pm
Well run pension funds and 401(k)’s follow essentially the same rules. You need to save enough to meet your payout obligations after factoring in market fluctuations.

Illinois hasn’t saved enough in the pension funds, so it makes it harder for it to recover from downturns.

Comment by Pelonski Wednesday, Apr 22, 20 @ 1:51 pm
Shelly: TRS has a liability issue due to lack of contributions by the state government. This shift of funds allowed the state to provide services it couldn’t afford, but the people of Illinois still wanted. That , however, created a “debt “ that must / should be paid. The pension systems in our state would have never had this liability if the state hadn’t “borrowed “ from the system’s by shorting payments . The Supreme Court has ruled that pensions must be paid ; no matter the circumstance. Indeed the opinion of the court was that an emergency was a time that all obligations should be fulfilled. So now, the time is to craft a budget and pay the obligations that were legally incurred. If you borrow from a 401k, you must repay that debt. If the state borrows from TRS, it must repay. (PS. I found the criticism about Iran/Iraq to be kind of snarky. Focus on the issue at hand )

Comment by Tired Teavher Wednesday, Apr 22, 20 @ 1:52 pm
Transitive property, folks (banned punctuation)

Iran invaded Iraq

Iraq invaded Kuwait

Therefore, Iran invaded Kuwait

(Also, should I be concerned that every time I now type “banned”, my cell phone’s primary suggestion is “punctuation”?)

Comment by Lynn S. Wednesday, Apr 22, 20 @ 1:53 pm
=== I found the criticism about Iran/Iraq to be kind of snarky. Focus on the issue at hand ===

I did it to prevent the entire thread from being hijacked by nitpickers. Move along.

Comment by Rich Miller Wednesday, Apr 22, 20 @ 1:55 pm
=Hippopotamus - Wednesday, Apr 22, 20 @ 1:18 pm:

Time to consider bankruptcy.=

Who would go bankrupt?
Certainly not those agencies backed by the state as states can not go bankrupt.

Comment by OpentoDiscussion Wednesday, Apr 22, 20 @ 1:59 pm
Forget it. He’s on a roll.

Comment by Snakepliskin Wednesday, Apr 22, 20 @ 2:04 pm
Governor, Peter Francis Geraci is on Line 1

Comment by Jose Abreu's Next Homer Wednesday, Apr 22, 20 @ 2:35 pm
So what TRS is really trying to say is, give them more money now while the prices are low.

Comment by Person 8 Wednesday, Apr 22, 20 @ 2:44 pm
==The pension systems in our state would have never had this liability if the state hadn’t “borrowed “ from the system’s by shorting payments==

Borrowed to help pay for employee salaries, raises, health care benefits, etc.

Comment by City Zen Wednesday, Apr 22, 20 @ 3:30 pm
OK, at the risk of incurring Rich’s wrath, which real politician do you think most resembles the future Sen. Blutarsky?

Comment by Hieronymus Wednesday, Apr 22, 20 @ 5:44 pm
Anonymous at 5:47pm was my post.

Comment by Hieronymus Wednesday, Apr 22, 20 @ 5:48 pm
Hieronymus - Glad you agree employee salaries and benefits were some of the many beneficiaries of shorting the pension systems.

Comment by City Zen Wednesday, Apr 22, 20 @ 6:38 pm
CZ, Glad you agree that employee salaries and benefits are not the _sole_ beneficiaries of this underfunding, but the entirety of the state budget.

Now that we’ve got this point clarified, you won’t be making this same omission the next time you post, right?

Comment by Hieronymus Wednesday, Apr 22, 20 @ 6:47 pm
Ignore City Zen when it comes to this topic. He is always cute with his commentary. Arrogant really

Comment by Demoralized Wednesday, Apr 22, 20 @ 6:55 pm
==My 401k plan doesn’t have a large net liability==

That’s nice. Irrelevant though.

Comment by Demoralized Wednesday, Apr 22, 20 @ 6:57 pm
CZ, you can’t say that fully paying pensions would have necessarily reduced salary packages. Too many variables and other alternatives, like raising taxes.

Comment by Jibba Wednesday, Apr 22, 20 @ 7:00 pm
Jibba

For CZ it’s an either or proposition - laries or pensions. Cant have both in his world

Comment by Demoralized Wednesday, Apr 22, 20 @ 7:11 pm
= Borrowed to help pay for employee salaries, raises, health care benefits, etc=

Along with every other line item in the budget for decades. So roads, bridges, public transportation, prairie patches, museums, libraries, parks, community centers, tornado sirens. fire and police equipment, Schools, Medicaid, food stamps, and on and on.

Comment by thoughts matter Wednesday, Apr 22, 20 @ 9:14 pm
Read a story where Mitch McConnell was interviewed and asked if state and local governments would be sent more money. His reply was no. He said he would rather allow states to declare bankruptcy. Story on Bloomberg and several other sites.

Comment by Pacman Thursday, Apr 23, 20 @ 7:17 am
Glad to see you all agree with me.

Comment by City Zen Thursday, Apr 23, 20 @ 8:22 am
Our objection, however, is with your 5%-truth characterization of employee pay/benefits being the _only_ driver of the underfunding.

The state just decided to borrow those funds from an unwilling lender (the pension funds) who did not have the ability to say, “No”.

Comment by Hieronymus Thursday, Apr 23, 20 @ 8:58 am