SD Retirement System has good investment return

PIERRE, S.D. (AP) -- Sharp gains in investment earnings have put the South Dakota Retirement System in even better shape to pay the retirement benefits of thousands of state, county, city and school employees, officials said Thursday.

State Investment Officer Matt Clark said the system's assets have grown significantly after earning 14.9 percent on investments in the first nine months of the financial year.

"That's good," Clark told the system's Board of Trustees, adding that the investment returns have far exceeded the goal of earning 7.25 percent a year.

The system's assets had grown to $8.78 billion by March 31, up about $1 billion since the start of the financial year July 1 after taking into account investment gains and benefits paid to retirees.

Rob Wylie, the Retirement System's executive director, said if the current level of investment returns holds through the remaining three months of the financial year, the system will likely be fully funded on June 30. That would mean its assets are 100 percent of the value of all potential future benefits to be paid to retirees in state and local government agencies.

South Dakota's public retirement system has consistently ranked among the top state pension plans in the nation in terms of investment earnings in the past few decades. Public pension plans in many other states are underfunded.

The numbers reported Thursday to the system's Board of Trustees provide only a snapshot of the system's financial condition. The system's official condition and the cost of living increase granted in benefits are based on its status on June 30 every year.

The system has more than 75,000 members, and most are still working. It includes employees of state government, cities, counties and school districts.

Clark said his office invests the Retirement System's money for the long haul.

"Whether it's a good year or a bad year, that's not going to affect how we're managing money. So we're going to focus on the long term, and we also believe that judgments about our success should be based on that long-term performance as well," Clark said.

He said that the South Dakota Retirement System's investment returns have ranked at the top of all similar state pension plans for decades. Although the system had bad returns in 2008 and 2009, it had huge gains in 2010 and 2011 before earning a modest 1.9 percent last year.

"Simply put, one-year results just don't matter. We're investing for the long term, and there's going to be all these roller coaster rides along the way," Clark said.

He also said the nation's debt will cause problems that could include slow economic growth with a depressed stock market or decent investment returns with higher inflation — meaning that the future could be rocky.

"It's going to be bad, but we don't know how," Clark told the Retirement System's board.

When the Retirement System is fully funded, pension payments increase by 3.1 percent the following year. Because it was only 93 percent funded last June 30, benefit payments will rise by only 2.1 percent on July 1 this year.

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