The Oklahoma Teachers Retirement System, once ranked among the nation’s worst-funded systems, is now a source of some good news.
An Oklahoma Pension Commission report found the system’s 16.3 percent return on investments in the first nine months of fiscal year 2013 placed it in the first percentile of all public funds in the United States. The fund’s assets now stand at more than $11.6 billion.
However, the system still has an enormous unfunded liability. As of June 30, 2012, the OTRS’s unfunded status totaled $8.4 billion; its funded ratio was just 54.8 percent, meaning the system could pay less than 55 cents on the dollar for all owed benefits.
The Legislature has enacted reforms that are gradually shoring up the system, along with healthy investment returns. In 2010, the OTRS was projected to never reach fully funded status. Now the system is on track to eliminate its unfunded liability in 22 years. The projection is based on achieving average 8 percent market growth on investments each year, so this year’s returns could quicken the pace to full funding.
Before legislative reforms, the teachers’ system had $10.4 billion in unfunded liabilities. Reform efforts cut that figure to $7.6 billion. Last year, investment losses increased that liability; this year’s returns will have an offsetting effect. While investment returns may ebb and flow year to year, the teachers’ retirement system is clearly headed in the right direction. A problem that once seemed insurmountable remains daunting, but appears far more manageable.