TCRS System on Firm Ground

As a result of the economic roller coaster over the past few days, TEA has received several inquiries regarding the actuarial soundness of the Tennessee Consolidated Retirement System (TCRS).  You might find the text of a letter from Jill Bachus, TCRS director, to be informative and reassuring.  The November issues of teach will carry additional information provided by the state treasurer office.

MEMORANDUM

TO:TCRS Board of Trustees

FROM: Jill Bachus

DATE: September 26, 2008

SUBJECT:  Recent Investment Market Activity and the Retirement System

The financial marketplace has been exhibiting a high degree of volatility for several months, mainly due to issues related to the mortgage industry.  Several of you have expressed concern or raised questions about the outlook and impact on the Tennessee Consolidated Retirement System (TCRS).  Some board members have also received questions from retirees and members of the system.

First and foremost, retirees and members have no risk of losing benefits as a result of investment market fluctuations.  Benefits are defined by law and are not subject to change when the system experiences investment gains or losses.  TCRS pre-funds its liabilities and is in the enviable position of being over 95% funded.  This is due to the leadership of the General Assembly, the Governor, and the TCRS Board of Trustees.  Since 1975 every Governor has budgeted and every General Assembly has appropriated sufficient money to fund the actuarial requirements set by the board.

TCRS has assets totaling more than $30 billion and therefore has sufficient funds to pay the benefits earned by our 100,000 retirees.  Because TCRS pre-funds its pension liability before members retire, the system is able to withstand volatility in the financial marketplace as it occurs from time to time.

The TCRS investment staff is closely monitoring the markets and potential actions by Congress.  The portfolio is widely diversified to reduce risk in a manner that prevents any one company from having a significant impact on returns.  While all pension systems have been negatively impacted by recent events, TCRS typically performs better than its peers in down markets.  This is largely due to its conservative asset allocation.

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