A Moment with MOSERS September 2023
The MOSERS Board of Trustees met for their regular quarterly meeting on September 21, 2023. Since the official minutes of that meeting won't be available until after they are approved at the next quarterly board meeting, we are providing this summary in order to get information to you more quickly. Please watch the video above and read the information below to learn more.
Welcome to this edition of A Moment with MOSERS!
On September 21st, the MOSERS Board met for their third quarter meeting. As always, the main objective of Board meetings is to ensure the long-term sustainability of promised benefits. To that end, the top priority of this meeting was certifying the employer contribution rate for fiscal year 2025, which begins July 1, 2024, and ends June 30, 2025. The employer contribution rate is the percent of payroll that a MOSERS-covered employer contributes each pay period to properly fund the retirement plan.
Over the past few months, the Board and staff, along with the System’s independent external actuary, have spent time discussing potential changes to the MOSERS Funding Policy. As you may recall, the Board has made significant changes to the funding policy over the last 5 years to help improve System funding in the long term. Nevertheless, the Board felt it was prudent to further evaluate this policy. As a conclusion to this work, at the meeting, the Board adopted a minimum contribution rate of 32%, which will be phased in over the next three fiscal years.
For fiscal year 2025, the minimum contribution rate will be 28.75%; and absent Board action, the fiscal year 2026 minimum rate will be 30.25%, and fiscal year 2027 will be 32%. As a result, the MSEP contribution rate for fiscal year 2025 is 28.75% of payroll. All assumptions being met, implementation of the minimum contribution rate in fiscal year 2025 will result in an estimated $35 million additional employer contributions to the System.
At the meeting, we also spent significant time discussing the MOSERS investment portfolio. With the assistance of staff and the System's investment consultant, the Board is currently undertaking an asset/liability study. As part of this study, the Board will decide what, if any, changes need to be made to the MOSERS target asset allocation. The target allocation is responsible for nearly 90% of the investment return.
You may recall the Board set a new asset allocation at the beginning of 2019. The portfolio in place since that time has returned 7.31%, which is above the policy benchmark of 6.16%. This means staff is adding value but, more importantly, the return is above our long-term investment return assumption of 6.95%. While 4½ years is not a significant amount of time in the life of a retirement fund, we believe this is a positive. As long-term investors, MOSERS strives to maximize long-term investment returns by investing System assets at a prudent level of risk to meet projected benefit payment obligations over the long term.
These are very heavy topics, so I want to thank the Board and my staff on all of their hard work.
Switching gears, once every four years, MOSERS with The Standard Insurance Company, offers optional life insurance open enrollment. The open enrollment period is the month of October and allows you to enroll in new coverage or increase coverage amounts without proving insurability. Please contact us or log in to myMOSERS if you would like to take advantage of this open enrollment period. (Note: The life insurance open enrollment is for actively employed members only; it is not available to retired or inactive-vested members.)
Thank you for watching this edition of A Moment with MOSERS.