Hawaii Pension System Sees Lower Funded Status

December 16, 2009 (PLANSPONSOR.com) - The Hawaii Employees' Retirement System's long-term funding problems widened during the state's latest fiscal year, according to an assessment by the fund's actuarial consultant.

The Honolulu Advertiser reports that the consultant noted the funding problem is likely to worsen this year even if investment returns rebound.

Consulting firm Gabriel Roeder Smith & Co. told ERS trustees the amount of what the pension plan potentially owes workers in the years ahead versus what it has in assets widened by a little more than $1 billion in the year ended June 30, 2009, the news report said. The unfunded actuarial liability stood at $6.24 billion at the end of the year, and may increase to more than $7 billion this year, the consultant said.

For now, the system is 65% funded, down from about 69% last year. At that level, the pension plan is in the bottom 25% of public retirement systems, the consultant reported.

The news report said the bad news was expected because of the major market downturn of the last year, and because of higher-than-forecast spending related to employee salaries. The actuarial consultant reported the value of ERS’ investment assets measured on an actuarial basis fell by $808.7 million, or 18%.

However, since the end of the fiscal year the investment returns have improved, with the ERS fund growing by 13.5% since July 1 (see Public Pension Systems Recovering from Downturn).

The state and counties paid $578.6 million to the ERS in the past fiscal year to cover their contributions toward employee retirement benefits, but the consultant said that may have to increase in coming years to narrow the funding shortfall.