July 1, 2016 marked an important milestone in the 69 year history of the Public Employees Retirement Association of New Mexico. That is when the final provision of pension reform legislation passed in 2013 took effect. On behalf of the PERA Board, I want to thank the Legislature and Governor for working with us to pass the reforms.
Patricia “Patty” French is the board chair of PERA.
Asking for shared sacrifice in 2013 from all of our members wasn’t easy. However, without reform, our ability to provide one of the best public pensions in the country would have been at risk.
Thanks to pension reform, we have seen a steady improvement in our solvency forecasts. As of our last valuation, PERA was projected to meet our goal of being 100% funded by 2043. Recent market volatility will likely impact FY16 results but there is no question that reform has had a significant, positive impact on PERA’s outlook.
Despite this progress, we will continue to stress caution going forward. Unfortunately, in each of the last three legislative sessions there have been efforts to change the PERA benefit, often under the guise of solving problems that are not the responsibility of the retirement system like employee retention, that would potentially roll back some of the progress we’ve made. We appreciate the Legislature resisting these efforts.
Now that PERA is on a more stable footing, we are focused on making sound, long term decisions to ensure that we pay the future benefits we’ve promised just as we’ve done for the past 69 years.
We recently adopted a new strategy for investing PERA’s $14 billion Fund that prioritizes lessening risk in the portfolio. The Board will also look at reducing our investment return projection from the current 7.75% to what we believe is a more realistic future rate.
Reducing the investment return assumption may impact our funding levels in the short term. However, it reflects market outlook for the foreseeable future, thereby helping the Board more prudently administer the Fund and the benefit we offer.
Pension reform was hard work and we are pleased that the law has now been fully implemented. Thanks in large part to the changes made in 2013, PERA continues to provide a solid retirement benefit to 38,000 current retirees and we will be able to do so for many years come.