Illinois TRS Revises Rate of Return Assumption

September 21, 2012 ( – The Teachers’ Retirement System (TRS) Board of Trustees approved revisions to the long-term assumed rate of return on its $36 billion investment portfolio from 8.5% to 8%.

The major effect of the new assumed rate of return will be to increase the system’s long-term unfunded liability ratio from the current 54.8% to 57.6%. The lower rate of return also will increase the state’s required annual contribution to TRS in fiscal year 2014 and after.  The state contribution in FY 2014 is expected to rise from $3.07 billion with an 8.5% rate of return to $3.36 billion with an 8% rate of return.   

The trustees also voted to undertake the next study of the system’s actuarial assumptions, including the assumed rate of return, in three years instead of the five years called for in state law because of the volatility of the world economy.  

The new revised rate of return is the product of an extensive review by Buck Consultants that also included recommended revisions to various actuarial data that is used by TRS to determine the cost of benefits, including mortality, member salaries, membership totals, retirement age and length of retirement.   

The system said the former 8.5% rate of return, first adopted by the TRS Board in 1997, has proven to be appropriate over time. The actual TRS investment rate of return between 1981 and 2011 was 9.3%.