NY Schools Anticipate Rising Pension Costs

August 15, 2014 (PLANSPONSOR.com) – Pension costs for school districts in New York State are expected to increase by 7.8%, according to a recent news report in the "Poughkeepsie Journal."

The districts’ bills are due in fall 2015 to the state’s Teachers Retirement System (TRS). The increase matches projections that the retirement system made in February. This will mark the fifth straight year of rising retirement costs.

However, the TRS believes that pension costs are likely to decrease during the 2015-16 school year, with an estimate of that rate expected this November.

The news report notes that pension costs have grown as the $107 billion TRS, with 277,000 active members and 150,000 retirees, has worked to recover from losses suffered during the recession. Also, the TRS maintains an anticipated rate of return of 8%, making the climb out of the recession that much more difficult.

Pension costs will rise, from 16.25% of payroll, to 17.53% of payroll for the upcoming school year, which started July 1, according to the news report. The bill is paid in fall 2015.

In 2013, New York State offered a pension-smoothing program for schools and local governments, letting them pay out the growth in pension costs over a seven-year period. Only 10 districts entered the program, including Yonkers, Rochester and Niagara Falls. Most districts elected to pay the pension bill in full rather than delay payments under the program.

The TRS pension fund posted a 13.7% return in the 2012-13 fiscal year but has missed its rate of return over the past five and 10 years. The rate of return for the 2013-14 school year will not be known until October, but was 13.5% percent for the first three quarters of the fiscal year, according to the news report. In the 2008-09 fiscal year, the fund posted a 20.5% loss. In the 2011-12 fiscal year, it had a 2.8% gain.