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TRS Actuarial Review Shows Improvement in Long-term Finances; State Contribution to Increase by 4%

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SPRINGFIELD, IL –The long-term funded ratio of Teachers’ Retirement System improved slightly during fiscal year 2021 to 42.5 percent after several years of hovering at 40 percent.

And the TRS Board of Trustees approved a state government contribution for the System of $5.89 billion for FY 2023, a 4 percent increase over the state’s $5.69 billion contribution for the current fiscal year.

Led by a strong +25.5 percent net investment return and a stable funding commitment from state government for the last few years, the System’s unfunded liability decreased slightly from $80.7 billion to $79.9 billion. TRS ended FY 2021 with a record $63.9 billion in assets, according to the System’s annual actuarial valuation, compiled by Segal Consultants of Chicago.

“While a small step, the improvement in the funded ratio is a positive move toward bringing stability to the system’s long-term finances,” said TRS Executive Director Stan Rupnik. “Any improvement is good news for our members, but we all realize that there’s still a lot of work ahead of us to sustain this momentum and reach our goal.”

In the last decade, the TRS funded ratio averaged 40.7 percent. Projections by Segal show slow but steady improvements in the funded ratio between FY 2021 and FY 2045, when state law requires TRS to have a funded ratio of 90 percent.

The funded ratio reflects the difference in the amount of money TRS has in assets against the amount of money the System needs to immediately pay all members the full amounts of benefits they are owed for the rest of time. Altogether, the System’s FY 2021 total long-term liability is $138.9 billion, a 2.4 percent increase over the previous year.

While the funded ratio is important as an official measure of the System’s long-term fiscal health, it is not a reflection of the System’s current financial ability to pay benefits. In any given year, TRS only is obligated under state law to pay out the amount of money owed annually to retired members and other beneficiaries. During FY 2021, benefits owed totaled $7.4 billion. TRS was more than able to pay all benefits for the year on time and in full. In fact, for 82 years TRS has paid all benefits in full and on time.

The actuarial valuation also revealed that since the 2019 inception of two benefit “buyout” programs, TRS members have collected $534 million in advance benefit payments, which has led to a $70 million reduction in the required state contribution in the new fiscal year.

In other action, the trustees approved a slight increase in the annual target amount of TRS assets that should be administered by investment managers that qualify as Minority and Women-owned Business Enterprises (MWBE). The Board set a new internal goal of 22 percent. The previous year’s MWBE goal was 21 percent and in FY 2021 approximately 24.3 percent of TRS assets were managed by 35 MWBE firms, or a total of $15.5 billion.

The Board also reviewed the following investment actions:

  • Within the System’s $10.2 billion Private Equity Portfolio:
    • The commitment of approximately $105 million to Inflexion Private Equity Partners, of London, United Kingdom. Inflexion currently manages $150 million in TRS assets.
    • The Commitment of $35 million to Sky9 Capital, of Shanghai, China in two funds. The first is $25 million to Sky9 Capital Fund V. The second is $10 million is to Sky9 Capital MVP Fund II. This is a new investment relationship for TRS.
  • Within the System’s $9.6 billion Real Assets Portfolio:
    • The commitment of up to $100 million to The BlackStone Group, of New York, New York. Blackstone currently administers $620 million in TRS assets.
    • The commitment of $60 million to Brasa Capital Management, of Los Angeles, California. This is a new investment relationship for TRS.
    • The commitment of $200 million to The LaSalle Group, of Chicago. LaSalle currently administers $6.9 million in TRS assets.
  • Within the $15.8 billion Income Portfolio:
    • The commitment of $100 million to Fundamental Advisors, of New York, New York. This is a new investment relationship for TRS.
    • The commitment of $100 million to IFM Investors, of Melbourne, Australia. This is a new investment relationship for TRS.
    • The commitment of $75 million to Proterra Investment Partners, of Minneapolis, Minnesota. Proterra currently administers $50 million in TRS assets.
  • Within the $5.5 billion Diversifying Strategies Portfolio:
    • The partial redemption of approximately $125 million from Aspect Capital, of London, United Kingdom. Aspect currently administers $342 million in TRS assets.
    • The partial redemption of approximately $40 million from Graham Capital Management, of Rowayton, Connecticut. Graham currently administers $440.7 million in TRS assets.
    • The partial redemption of $100 million from Tilden Park Capital Management, of New York, New York. Tilden Park currently administers $286.5 million in TRS assets.

About Teachers’ Retirement System

The Teachers’ Retirement System of the State of Illinois is the 42nd largest pension system in the United States, and provides retirement, disability and survivor benefits to teachers, administrators and other public school personnel employed outside of Chicago. The System serves 434,000 members and had assets of $63.9 billion as of June 30, 2021.

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